Chinese Bankruptcy Law

1. It is still not good timing for PRC to establish the personal bankruptcy, esp. credit
system is not perfected in China now. So, the wholesale industry will not worry about it. There is no consumer debt for the individual to petition the bankruptcy.

2. Both debtor and creditor can petition the debtor's bankruptcy. Also, debtor can use the restructure/reorganization assets to save the debtor. Then the going concern value can be preserved. Creditors may get higher paying off rate.

3. For courts, due to the history reason, there was only state-owned enterprise who petitioned the bankruptcy as the policy bankruptcy was accepted. Also, laid off workers are a concern of the courts if the bankruptcy petition is accepted and it may cause the social unrest and workers may adopt the "SHANG FANG". Then, the government may exert the pressure on the courts. Courts do not want to be troubled due to be involved in the bankruptcy. Another reason is  the social psychology: "PO CHAN" in Chinese (Pin yin of the bankruptcy) means the broken and go to die. So, there is kind of natural resistance to this word and further negative influence the application of the law in real life.4. As the trustee in China, there are several ways to appoint the trustee. The common way adopted now is to establish a trustee list (after evaluation by the experts) by the courts and then, the court will choose one from the list random by way of drawing lots. It seems fair and no corruption will be caused. As a trustee, it will assume the responsibility it caused loss to the any other party. The way is to be fined by the court, compensate the relevant party who suffered the loss or the name of the trustee will be moved out of the list by the court.

Chinese company offshore/onshore IPO capital raising legal and financial risks

1. There are more and more foreign issuers who do IPO in U.S. stock market according to U.S. security law and the relevant rules. Like in China, due to the time consuming IPO in domestic stock markets, some companies choose to raise money from the U.S. financial market. Also, the rules for the capital raising are different between the Chinese market and U.S. market, so, it is a little bit easier for the Chinese companies to raise money in U.S. market by the structure of the offshore companies. The general structure for the companies entities is like this, there is one company registered in Cayman Islands or BVI (British Virgin Islands). This first tier (offshore company)is the entity to be listed in U.S. stock market, like NASDAQ  or New York Stock exchange. Then, this entity 100% hold the Chinese company directly or indirectly. Another benefit for setting up the company in Cayman Island or BVI etc. is that it is tax free for these companies. During the process, there are several countries lawyers who have been involved in, U.S. lawyer, offshore country's lawyer and Chinese lawyer.

2. Due to the different entity, there are different law application and legal risks for the investors. Firstly, the offshore company is the public listed company in U.S. stock market, therefore, the Cayman law should be applied for the shareholders who hold its shares or ADS. Also, if the offshore company goes to bankruptcy, not the U.S. bankruptcy code should be applied, it is the offshore country's bankruptcy law will be applied. If you get the judgments favor of you as a shareholder, however, there is also uncertainty as to whether the courts of the Cayman Islands would recognize or enforce against the offshore company, its directors.

3. Another thing is about of the related parties transactions ,the assets pledge or mortgage and the controlling shareholders or the actual controlling person, together with the bank relationships.

cooperation with overseas lawyers

I'd like to cooperate with the overseas lawyers concerning the Chinese legal service and the overseas legal service.