26 ASIAN LEGAL BUSINESS CHINA • 亚洲法律杂志-中国版 FEBRUARY 2024 Zhou tells ALB, “This includes the disposal of Tomorrow Group-linked enterprises starting from 2022, as well as the disposal of conglomerates such as Evergrande-, Oceanwide-, and Zhongzhilinked enterprises since 2023.” “We anticipate that there may still be significant adverse occurrences involving trust and non-standard financing products, which will trigger liquidation procedures for related companies this year,” says Zhou. Beyond the industries mentioned earlier, Wang believes that based on the principle of insolvency contagion, “retail, cultural tourism, new energy, and technology companies could be the focal points for future insolvency and restructuring. In previous years, these enterprises were the centre of investment attention, yet now they are experiencing market differentiation due to the high level of competition.” INSOLVENCY OF LISTED COMPANIES Another noteworthy trend is that the insolvency of listed companies is increasingly normal. Zhou tells ALB that DeHeng, as one of the earliest Chinese law firms to delve into the restructuring of listed companies, remained intimately involved in the restructuring efforts of listed companies and their parent companies in 2023, with projects such as Xining Special Steel and Xinlian Cultural Tourism. “The Chinese courts and securities regulators are increasingly adopting a more open and supportive stance towards the restructuring of listed companies. At the end of 2023, 118 listed companies in China had been approved by the court to implement restructuring plans. Over the past five years, 64 of these companies have been approved, accounting for over half of the total,” says Zhou. Zhuojian has also played an active role in related projects. Tang has observed some particular trends: “As the capital market continues to evolve, the insolvency and restructuring of listed companies will become increasingly standardized and transparent. Listed companies that engage in the occupation of funds for non-operational activities or illegal guarantees will face challenges in obtaining opportunities for restructuring. Those that are wellmanaged and hold potential will be able to revive their operations through restructure plans. In addition, industry consolidation will assume a pivotal role, and the debt restructuring conducted during the insolvency process will exhibit increased flexibility and diversity.” In recent years, W&H has been intimately involved in the restructuring efforts of multiple listed companies. Specifically, they have served as insolvency administrators in notable cases such as Qinling Cement, BIT EMC, and Wonzeal. Wang highlights that this field is undergoing a shift from mere “shell resource” restructuring to substantive restructuring. “With the implementation of the registration IPO system, the value of shell resources has diminished, leading to an increase in cases involving the substantive restructuring of assets, debts, businesses, and equities.” Lawyers have also observed a growing importance of pre-restructuring and a surge in instances of coordinated insolvency. Wang tells ALB, “Among the 15 listed company insolvency cases that were approved for restructuring in 2023, pre-restructuring procedures were initiated for 14 of them before their official acceptance for restructuring. The primary reason lies in the fact that the formal restructuring of listed companies requires approval from both the Securities Regulatory Commission and the Supreme People’s Court. To increase the likelihood of approval, it is essential to make the restructuring plan more definitive and feasible.” In terms of coordinated insolvency, Zhou notes that “the coordinated restructuring between listed companies and their subsidiaries has become a common practice.” Wang also observes that “in 2023, several listed companies underwent coordinated insolvency with their subsidiaries and controlling shareholders. The primary reason was that assets, businesses, equity, and financing were spread across multiple entities. This means that restructuring a single entity is insufficient to address the problem.” CROSS-BORDER BREAKTHROUGHS In the past year, the topic of cross-border insolvency has garnered increasing attention from the market. In fact, in 2023, there have been numerous advancements in cooperation between China and other countries in the field of cross-border insolvency. Zhou provides several notable examples. The Shanghai No. 3 Intermediate Court issued a ruling in September, acknowledging the decision made by the Tokyo District Court of Japan to initiate a civil restructuring procedure. This ruling represents the “first Japanese insolvency proceeding to be recognized by a Chinese court.” Furthermore, “the Xiamen Maritime Court recently issued a ruling acknowledging the identity and status of Singaporean judicial administrators, while the Beijing No. 1 Intermediate Court made a decision to acknowledge German insolvency procedures and the identity of German administrators. These cases mark a further development in China’s cross-border insolvency practice.” Wang highlights the progress that has been made in the recognition and assistance of insolvency procedures between Mainland China and Hong Kong SAR in recent years. Specifically, following the signing of the Memorandum of Understanding on Mutual Recognition and Assistance in Insolvency Procedures between Mainland and Hong Kong SAR in 2021, “there has been a rise in crossborder insolvency procedure cooperation between the two places. W&H has been earnestly facilitating law firm cooperation between Mainland and Hong Kong SAR. For instance, W&H Peixiong (Qianhai) Joint Law Practice was officially launched at the beginning of 2024. Additionally, W&H is in the process of establishing a branch office in Hong Kong.” DeHeng also places a special emphasis on the advancement of cooperation in insolvency procedures between Mainland and Hong Kong SAR. Zhou tells ALB: “In a recent case involving Hong Kong’s liquidation procedures, which was handled by DeHeng’s lawyer team, the Beijing No. 4 Intermediate Court and the Beijing High Court upheld the jurisdiction of the Chinese courts INSOLVENCY
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