[Home] [Databases] [WorldLII] [Search] [Feedback] Laws of the People's Republic of China

You are here:  AsianLII >> Databases >> Laws of the People's Republic of China >> CIRCULAR OF THE STATE COUNCIL CONCERNING STRENGTHENING THE ADMINISTRATION OF FINANCIAL CREDITOR'S RIGHTS IN THE STRUCTURAL REFORM OF MEDIUM- AND SMALL-SIZED STATE-OWNED ENTERPRISES AND COLLECTIVE ENTERPRISES

[Database Search] [Name Search] [Noteup] [Help]

CIRCULAR OF THE STATE COUNCIL CONCERNING STRENGTHENING THE ADMINISTRATION OF FINANCIAL CREDITOR'S RIGHTS IN THE STRUCTURAL REFORM OF MEDIUM- AND SMALL-SIZED STATE-OWNED ENTERPRISES AND COLLECTIVE ENTERPRISES

    People's governments of the province, autonomous region and municipality
directly under the Central Government, ministries and commissions of the State
Council, and organizations directly under the State Council:

    Since the conclusion of the 15th National Congress of the Party, all
localities and departments have made some achievements in quickening
enterprise restructuring in accordance with the requirements of establishing
the socialist market economic system. However, in the course of the structural
reform of medium- and small-sized state-owned enterprises and collective
enterprises, quite a few localities present the phenomenon of taking
enterprise restructuring as an opportunity to suspend, evade or reject
financial debts. This activity has seriously undermined the social credit
relations and resulted in a large quantity of suspended creditor's rights in
financial institutions, as well as a drop in quality of credit assets and
drain on state-owned assets. For the purposes of standardizing the structural
reform work in medium- and small-sized state-owned enterprises and collective
enterprises, preventing and curbing acts of evading or rejecting financial
debts in various forms, conscientiously protecting the legitimate rights and
interests of financial institutions, and taking precautions against financial
risks, this Circular regarding strengthening the administration of financial
creditor's rights in the structural reform of medium- and small-sized
state-owned enterprises and collective enterprises is hereby issued as follows:

    1. To Strengthen Conscientiously the Guidance and Supervision over
Enterprise Restructuring

    All localities and departments should proceed with the general interests,
conscientiously carry out state policies and measures for enterprise
restructuring, strengthen the guidance and supervision over the structural
reform work in medium- and small-sized state-owned enterprises and collective
enterprises, standardize behaviours in enterprise restructuring, and
resolutely curb acts of evading and rejecting financial debts in various
forms. Local people's governments should attach great importance to the
preservation of financial creditor's rights in enterprise restructuring of
their respective regions and lend strong support to financial institutions in
the administration of their financial creditor's rights; they are strictly
prohibited from shielding and conniving at the acts of evading and rejecting
financial debts committed by enterprises in the restructuring.

    2. To Confirm Financial Debts According to law by Enterprises in the
Restructuring

    The structural reform of medium- and small-sized state-owned enterprises
and collective enterprises shall be carried out in strict accordance with
relevant state laws and policies as well as the provisions of the Circular
Concerning Prevention of Drain on Bank Credit Assets (Yinfa [1994] No. 40)
promulgated by the People's Bank of China, the State Economic and Trade
Commission and the Administration of State Property. All enterprises must
devote their whole attention to financial institutions' views on the
preservation of their creditor's rights in the restructuring and confirm
financial debts according to law, no matter whatever forms of the
restructuring they will adopt. Those enterprises whose financial debts have
not yet been confirmed shall not start the restructuring work and departments
concerned shall not handle formalities for examination and approval of their
restructuring and registration and shall not renew their business licences.
Evasion and rejection of financial debts occurring in the restructuring of
enterprises before the issuance of this Circular must be corrected without
delay and the financial creditor-debtor relationship must be reestablished.

    3. To Take an Active Part in Enterprise Restructuring and Maintain the
Safety of Financial Creditor's Rights According to Law by Financial
Institutions

    The structural reform of medium- and small-sized state-owned enterprises
and collective enterprises shall require the participation of financial
institutions if their creditor's rights have been involved. The financial
institutions should exercise strict supervision over the verification and
evaluation of assets in the restructuring of enterprises. All financial
institutions should conscientiously practise a responsibility system for the
preservation of financial creditor's rights, make a great effort to check up
and confirm creditor's rights, maintain the safety of financial creditor's
rights in real earnest, and report at regular intervals the preservation of
financial creditor's rights to the People's Bank of China. For those regions
where financial debts are suspended, evaded and rejected seriously, all
financial institutions having claims on these financial debts should lower the
credit grades of their branches in the regions.

    4. To Do a Good Job in the Evaluation of Assets and Registration of
Property Rights of the Enterprises in the Restructuring

    The structural reform of medium- and small-sized state-owned enterprises
and collective enterprises must be subjected to the strict evaluation and
verification of their assets. With regard to medium- and small-sized
state-owned enterprises, results of assets evaluation shall be submitted to
the department in charge of state property administration for confirmation.
In accordance with provisions of the Measures for the Registration of State
Property Rights of Enterprises (Decree No. 192 of the State Council),
formalities for registration of change in property rights should be completed
in case of any change in property rights in the restructuring of medium- and
small-sized state-owned enterprises. In handling formalities for registration
of change in property rights, relevant departments should require the
restructured enterprises to present the document for the preservation of
financial creditor's rights that is issued by the financial institutions
concerned. The department of the State Council in charge of state property
administration should step up the administration and inspection of assets
evaluation agencies, conscientiously ensure the confirmation and evaluation of
assets for the restructured enterprises, and impose strict prohibitions
against the distribution of state property to individuals by means of
intentional underrating or free apportioning of assets of restructured
enterprises. Assets evaluation agencies must obtain the legal qualification
authentication and the permit for business and should be formed into genuine
social intermediary organizations that run in a fair and just manner,
exercise evaluation according to law, practise self-discipline, and bear
corresponding legal responsibilities.

    5. To Further Strengthen the leadership, organization and coordination
over the Administration of Financial Creditor's Rights

    The People's Bank of China should attach great importance to the
administration of financial creditor's rights in the structural reform of
enterprises and take the initiatives in exchanging views with local people's
governments and coordinating their actions in order to strengthen the
leadership over the administration of financial creditor's rights.
Safeguarding financial creditor's rights shall be treated as an important job
in financial supervision by setting practical measures, promptly resolving
problems emerging in the work, and reporting major issues, if found, to the
State Council as soon as possible. Any branch of the People's Bank of China
should, upon discovery of actions evading and rejecting financial creditor's
rights within its jurisdiction, immediately impose a ban and report the case
to the local people's government and the bank at the next higher level.

    The People's Bank of China should organize financial institutions
concerned in checking up on accounts opened by enterprises in different names.
Any financial institution should resolutely practise the fundamental deposit
account system in strict accordance with the provisions of the People's Bank
of China regarding account management and prevent restructured enterprises
from evading and rejecting financial debts by opening accounts in different
names. For those restructured enterprises that the People's Bank of China
considers have evaded and rejected financial debts, all financial institutions
shall not open accounts for them and nor provide services such as extending
loans and settling accounts.

    6. To Strengthen Publicity on Financial Laws and Promote the Understanding
of Social Credit

    All localities and departments should make great effort at publicity on
financial laws, raise the sense of financial safety in the whole society, and
maintain the proper relationship of social credit. All local people's
governments should lend support to people's courts in trying cases of disputes
over financial claims and debts independently and impartially according to
law, strengthen the cultivation of the sense and mentality of legality, and
create a favourable environment for governing by law. Wide publicity should be
given to enterprises that have accomplished the preservation and appreciation
of state-owned and collectively-owned assets through being restructured
according to law. Units and individuals that have caused the loss of credit
assets as a result of illegal restructuring measures and taking advantage of
restructuring to evade and reject financial debts should be dealt with sternly
and made public by circulating a notice.

    Where violation of the provisions of this Circular has resulted in losses
of financial creditor's rights, the person in charge of the unit concerned and
persons directly responsible shall be investigated for their responsibilities
in all earnestness. If crimes have been constituted, the violators should be
transferred to the judicial organs and investigated for criminal
responsibility according to law. Where a local people's government supports
and winks at evasion and rejection of financial debts in the restructuring of
enterprises, the leading official concerned shall be investigated for his
responsibility.