A TALE OF TWO
ANCIENT
ECONOMIES: CHINA
& INDIA –
BANKRUPTCIES AND
RESTRUCTURING
CHAIR: Alan CW Tang
Professor Li Shuguang
Kirtee Kapoor
Dr. Yin Zhengyou
Sajeve Deora
24 March 2014
Mr.
Mr.
In the beginning: debtorcreditor relationship
• Traditional cultural stigma
• Pejorative associations
• Confucianism teachings
• Family and caste systems
• All debts must be paid
P. 1
Break through: the 1st laws
• 1848 (India) vs 1906 (China)
• How these laws came about?
• Law vs culture / stigma
• International trade, market-led
economies
• Economic reform
P. 2
The current laws
India:
• 1956 and 2013 Companies Acts
• SICA / RDDBFI / SARFAESI / Relief
Undertakings
• Provincial Insolvency Act 1920?
China:
• 1986 and 2006 Enterprise
Bankruptcy Law (PRC)
• Supreme People’s Court Judicial
Interpretations
P. 3
How the laws have fared –
India?
BIFR registrations from 1987 to till date – 5,962 nos.
Recovery through various channels
INR, Bil
Debt
Recovery
%
Lok Adalat
66
4
6.1
RDDBFI
310
44
14.0
SARFAESI
681
185
27.1
Source: Report on Trend and Progress of Banking in India 2012-13
CDR References (up to December 31, 2013)
Particulars
Received
Not
admitte
d
Under
consider
ation
Total
approved
Cases
withdrawn
Cases
exited
Live
cases
Nos.
605
105
57
443
115
69
259
Debt, INR
Bil
4,076
528
654
2,892
290
526
2,076
Source: CDR Office
P. 4
How the laws have fared –
PRC?
No. of cases
New Enterprise Bankruptcy Cases in the PRC from 1989 - 2012
10000
9110
8615
9000
7746
8000
7219
7000
7673
5622
5875
6000
5396
5928
5000
4328
3817
4000
2583
4253
3139
3000
3567
2531
3128
1625
2000
2100
728 710
1000
98 32 117
0
89 90 91 92 93 94 95 96 97 98 99 20 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Year
Note:
The 2007 figure includes cases under the 1986 Law;
From 2008 all cases under 2006 Law
Source: Bankruptcy and Restructuring Law Research
Centre, University of China Politics and Law
P. 5
How the laws have fared –
India & China?
• Success or failure, or … ?
• Government support or
hindrances?
• The legal system and interplay
with other laws
• Cultural stigma still a problem?
• Abuse of the law?
P. 6
Something new – China:
the Credit Investigations
Industry
• January 2013 – Regulations
on the Administration of
Credit Investigation
• Establishment of personal
credit reference agencies
• Small & Medium Enterprises
(SMEs) and individuals are
starting to have greater
access to credit.
P. 7
Something new – India
• Deal with stress at incipient
stage
• Collective schemes under
stricter control
• More private banks;
consolidation
• Specialist services engaged for
recovery
• Role of Administrators
• Liberal environment for ARC’s
P. 8
International interplay China
• Cross-border provisions of
EBL
• Impact of UNCITRAL Model
Law
• Recent cases and lessons to
learn, e.g. Suntech, [Li and
Yin to add names of others]
P. 9
International interplay India
• Cross-border provisions of
Companies Act
• Impact of UNCITRAL Model Law
• Recourse to overseas guarantors
• Foreign decrees / awards
• Statutory process is main
proceeding
• Concessions to revival
• Change of control of defaulters
P. 10
Prospects and
development – China &
India
•
Restructuring vs bankruptcy
•
Creditor vs debtor protection
• Specialised Bankruptcy
Courts and insolvency
profession
•
International aspects
• Adoption of UNCITRAL Model
Law?
P. 11