LAW OF THE PEOPLE’S REPUBLIC OF CHINA ON ENTERPRISE BANKRUPTCY

No. 54

The Law of the People’s Republic of China on Enterprise Bankruptcy, which has been adopted at the 23rd meeting of the Standing Committee
of the 10th National People’s Congress of the People’s Republic of China on August 27, 2006, is hereby promulgated and shall come
into force as of June 1, 2007.
Hu Jingtao, President of the People’s Republic of China

August 27, 2006

Law of the People’s Republic of China on Enterprise Bankruptcy (2006)

(Adopted at the 23rd meeting of the Standing Committee of the 10th National People’s Congress of the People’s Republic of China on
August 27, 2006)

Table of Contents
Chapter I General Provisions

Chapter II Application and Acceptance

Section I Application

Section II Acceptance

Chapter III Custodian

Chapter IV Assets of Debtors

Chapter V Bankruptcy Expenses and Community Debts

Chapter VI Declaration of the Creditor’s Rights

Chapter VII The Meeting of Creditors

Section I Common Provisions

Section II Committee of Creditors

Chapter VIII Rectification

Section I Application for and Period of Rectification

Section II Formulation and Approval of a Rectification Plan

Section III Implementation of a Rectification Plan

Chapter IX Reconciliation

Chapter X Bankruptcy Liquidation

Section I Bankruptcy Declaration

Section II Conversion and Distribution

Section III Termination of the Procedures for Bankruptcy

Chapter XI Legal Liabilities

Chapter XII Supplementary Provisions
Chapter I General Provisions

Article 1

The present Law is formulated to regulate the procedures of enterprise bankruptcy, fairly liquidate the credits and debts, safeguard
the legitimate rights and interests of creditors and debtors and maintain the market order of the socialist economy.

Article 2

Where an enterprise legal person fails to pay off its debts, and that if its assets are not enough to pay off all the debts or if
it is obviously incapable of paying off its debts, its debts shall be liquidated in accordance with the provisions of the present
Law.

Where an enterprise legal person is under the aforesaid circumstance or it is obviously likely that it is incapable of paying off
its debts, it may be subject to rectification in accordance with the provisions of the present Law.

Article 3

The bankruptcy case shall be under the jurisdiction of the people’s court where the relevant debtor is domiciled.

Article 4

Where the procedures for hearing a bankruptcy case are not prescribed in the present Law, they shall be subjected to the relevant
provisions of the Civil Procedure Law.

Article 5

The procedures for bankruptcy, which have been initiated according to the present Law, shall have binding force upon the assets of
relevant debtors outside of the territory of the People’s Republic of China.

Where any legally effective judgment or ruling made by a foreign court over a bankruptcy case involves any debtor’s asset within the
territory of the People’s Republic of China, if the debtor applies with or requests the people’s court to accept or execute it, the
people’s court shall, in light of the relevant international treaties that China has concluded or joined or the principles of reciprocity,
carry out an examination thereon and, when holding that it does not violate the basic principles of the laws of the People’s Republic
of China, does not damage the sovereignty, safety or social public interests of the state, does not damage the legitimate rights
and interests of the debtors within the territory of the People’s Republic of China, accept and execute the judgment or ruling..

Article 6

When hearing a bankruptcy case, the people’s court shall guarantee the legitimate rights and interests of the employers in the insolvent
enterprise and investigate its administrators’ legal liabilities.

Chapter II Application and Acceptance

Section I Application

Article 7

A debtor, under the circumstance as prescribed in Article 2 of the present Law, may file an application with the people’s court
for rectification, reconciliation or bankruptcy liquidation.

Where the debtor fails to pay off its due debts, the creditor may file an application with the people’s court for rectification or
bankruptcy liquidation.

Where an enterprise legal person has been dissolved without any liquidation or without completing the liquidation, and the relevant
assets are not enough to pay off the debts, the person liable for liquidation shall apply with the people’s court for bankruptcy
liquidation.

Article 8

When applying for bankruptcy, an Application for Bankruptcy and the related evidences shall be submitted to the people’s court:

The following items shall be indicated in the Application for Bankruptcy:

(1)

Basic introduction of the applicant and the respondent;

(2)

Purpose of the application;

(3)

Facts and ground for the application; and

(4)

Other items that the people’s court deems necessary to be indicated.

Where a debtor files an application, it shall submit the statement on financial status, checklist of debts, checklist of the creditor’s
rights, relevant financial statements, a plan for employees’ arrangement as well as the payment documents of wages and social insurance
premiums.

Article 9

Before the people’s court accepts an application for bankruptcy, the applicant may request for withdrawing its application.

Section II Acceptance

Article 10

Where a creditor files an application for bankruptcy, the people’s court shall, within 5 days as of the receipt of the application,
notify the related debtor. Where the debtor has any objection to the application, it shall bring forward its objection to the people’s
court within 7 days as of the receipt of the notice from the people’s court. The people’s court shall decide whether or not to accept
the case within 10 days as of expiration of the term for filing an objection.

Except for the circumstance as prescribed in the preceding paragraph, the people’s court shall decide whether or not to accept an
application for bankruptcy within 15 days as of the receipt of the application.

Under any special circumstance where the term for accepting a case as prescribed in the preceding two paragraphs is required to be
extended, it may be extended for another 15 days upon the approval of the people’s court at the next higher level.

Article 11

Where the people’s court accepts an application for bankruptcy, it shall, within 5 days as of the day when the decision is made,
serve it on the relevant applicant.

Where a creditor files an application, the people’s court shall, within 5 days as of the day when a decision is made, serve it on
the relevant debtor. The relevant debtor shall, within 15 days as of the day when the decision is served, submit to the people’s
court its statement on financial status, checklist of debts, checklist of the creditor’s rights, the relevant financial statements
as well as the payment documents of wages and social insurance premiums.

Article 12

Where the people’s court decides not to accept an application for bankruptcy, it shall, within 5 days as of the day when the decision
is made, serve its decision on the applicant with its reasons. If the applicant is dissatisfied with the decision, it may, within
10 days as of the day when the decision is served, appeal to the people’s court at the next higher level.

During the period from the day when the people’s court accepts an application for bankruptcy to the day when a bankruptcy is announced,
if it is found that the relevant debtor is not under the circumstance as prescribed in Article 2 of the present Law, its application
may be rejected. If the applicant is dissatisfied with the decision, it may, within 10 days as of the day when the decision is served
on, appeal to the people’s court at the next higher level.

Article 13

Where the people’s court accepts an application for bankruptcy, it shall meanwhile designate a bankruptcy custodian.

Article 14

The people’s court shall, within 25 days as of the day when it decides to accept an application for bankruptcy, notify the relevant
creditors and announce its decision as well.

The following items shall be indicated in the aforesaid notice and announcement:

(1)

Names of the applicant and the respondent;

(2)

The time when the people’s court accepts the application for bankruptcy;

(3)

Term, address and points of attention in the declaration of the creditor’s rights;

(4)

Name of the custodian as well as the address where it undertakes its business;

(5)

Requirements that the debtors or asset holders of the debtor shall pay off the debts or deliver the assets;

(6)

When and where the first creditors’ meeting is held; and

(7)

Other items that the people’s court deems necessary to be notified and announced.

Article 15

During the period from the day when the people’s court’s decision which accept the application for bankruptcy is served on the debtor
to the day when the procedures for bankruptcy are terminated, the relevant personnel of the debtor shall bear the following obligations:

(1)

Well preserving the assets, seals and account books as well as documents under its occupation and management;

(2)

Working in light of the requirements of the people’s court and the bankruptcy custodian, and answering their inquiries faithfully;

(3)

Attending the creditor’s meeting as a nonvoting delegate and answering the creditor’s inquiries according to the fact;

(4)

Not leaving its domicile if without the permission of the people’s court; and

(5)

Not assuming any post of director, supervisor or senior manager in any other enterprise.

The term “relevant personnel” as mentioned in the preceding paragraph refers to the legal representatives of an enterprise, which
may, upon the approval of the people’s court, include the financial managers and other operators of the enterprise.

Article 16

After the people’s court accepts an application for bankruptcy, any repayment of debts made by a debtor to any individual creditors
shall be deemed as invalidated.

Article 17

After the people’s court accepts an application for bankruptcy, the debtors or asset holders of the debtor shall pay off the debts
or deliver the relevant assets to the bankruptcy custodian.

Where any debtor or asset holder deliberately violates the provisions of the preceding paragraph by paying off its debts or delivering
the assets to the debtor, and thus incurs loss to the relevant creditors, its obligation of paying off the debts or delivering the
assets shall not be exempted.

Article 18

After the people’s court accepts an application for bankruptcy, the relevant custodian shall have the right to decide to unchain
or continue to perform a contract that has been established before the acceptance yet has not been fully performed by both parties
concerned, and notify the opposite party concerned of its decision. Where the bankruptcy custodian fails to notify the opposite party
concerned within 2 months as of the acceptance or to make any reply to an urge made by the opposite party concerned, it shall be
deemed that the contract is unchained.

Where the bankruptcy custodian decides to continue a contract, the opposite party concerned shall continue to perform the contract
yet has the right to request the custodian to provide guarantee. Where the custodian does not provide any guarantee, it shall be
deemed that the contract is unchained.

Article 19

After the people’s court accepts an application for bankruptcy, the relevant measures for preserving the debtor’s assets shall be
released and the procedures for execution shall be suspended.

Article 20

After the people’s court accepts an application for bankruptcy, any civil action or arbitration related to the debtor, which has
been started yet not ended, shall be suspended. The civil action or arbitration can be resumed after a bankruptcy custodian takes
over the debtor’s assets.

Article 21

After the people’s court accepts an application for bankruptcy, the relevant debtor’s civil action shall be filed to the very people’s
court only.

Chapter III Custodian

Article 22

A bankruptcy custodian shall be designated by the people’s court.

Where it is considered at the creditors’ meeting that the custodian fails to perform or fulfill its duties and functions in a lawful
and impartially manner, the creditors’ meeting may apply with the people’s court for the change of the custodian.

The measures for designating bankruptcy custodians and deciding the remunerations for bankruptcy custodians shall be formulated by
the Supreme People’s Court.

Article 23

A bankruptcy custodian shall, in accordance with the provisions of the present law, fulfill its functions and duties, report its
work to the people’s court and accept the supervision of the creditors’ meeting and the creditors’ committee.

The bankruptcy custodian shall attend the creditors’ meeting as a nonvoting delegate, report the fulfillment of its duties and functions
and answer the relevant inquiries.

Article 24

The post of a bankruptcy custodian may be assumed by a liquidation group comprised of personnel from relevant departments and organs
or by such lawfully established social intermediary agencies as a law firm, an accounting firm, a bankruptcy liquidation firm and
etc..

The people’s court may, in light of the real status of a debtor and upon consulting the opinions of the relevant social intermediary
agencies, designate the relevant personnel who have a good command of special knowledge and have obtained the practice qualification
as a bankruptcy custodian.

Under any of the following circumstances, one may not assume the post of bankruptcy custodian:

(1)

Having a record of criminal punishment for deliberate crime;

(2)

Having been revoked of the relevant practice qualification certificate of related specialty;

(3)

Having any interest with the case; or

(4)

Any other circumstance under which the people’s court deems it improper for it to act as a bankruptcy custodian.

Where an individual assumes the post of a bankruptcy custodian, he shall purchase the responsibility insurance for practice.

Article 25

A bankruptcy custodian shall fulfill the following functions and duties:

(1)

Taking over the asset, seals as well as the account books and documents of the debtor;

(2)

Surveying the financial status of the debtor and formulating the financial statements;

(3)

Determining the internal management of the debtor;

(4)

Determining the daily expenditure and other necessary expenditures of the debtor;

(5)

Determining, before the holding of the first meeting of creditors, whether to continue or terminate the debtor’s business;

(6)

Managing and disposing of the debtors’ assets;

(7)

Appearing in actions, arbitrations or any other legal procedures on behalf of the debtor;

(8)

Suggesting the hold of creditors’ meetings; and

(9)

Fulfilling other functions and duties that the people’s court believes it should perform.

In the case of any separate provision on the bankruptcy custodian’s functions and duties in the present Law, it shall prevail.

Article 26

Before the first meeting of creditors is held, where a bankruptcy custodian decides to continue or terminate the business operation
of a debtor or has any of the acts as prescribed in Article 69 of the present Law, it shall be subject to the approval of the people’s
court.

Article 27

A bankruptcy custodian shall be diligent and devoted to their duties, and shall faithfully fulfill its (his) duties as well.

Article 28

A bankruptcy custodian may, upon the approval of the people’s court, employ relevant work staff as it is necessary.

The remunerations of a bankruptcy custodian shall be decided by the people’s court. In case the meeting of creditors has any objection
to the remuneration of a bankruptcy custodian, it shall have the right to file demurral to the people’s court.

Article 29

A bankruptcy custodian shall not quit its post without any justifiable reason. The resignation of a bankruptcy custodian shall be
subject to the approval of the people’s court.

Chapter IV Assets of Debtors

Article 30

The assets of a debtor refer to all the assets that belong to the debtor when an application for bankruptcy is accepted, as well
as the assets as obtained by the debtor during the period from the day when an application for bankruptcy is accepted to the day
when the procedures for bankruptcy are ended.

Article 31

Within 1 year before the people’s court accepts an application for bankruptcy, the bankruptcy custodian has the right to request
the court to revoke any following act related to the debtor’s assets:

(1)

Transferring the assets free of charge;

(2)

Trading at an obviously unreasonable price;

(3)

Offering asset guarantee to those debts without any asset guarantee;

(4)

Paying off the undue debts in advance; or

(5)

Giving up the creditor’s rights.

Article 32

Within 6 months before the people’s court accepts an application for bankruptcy, where a debtor is under any circumstance as prescribed
in paragraph 1, Article 2 of the present Law where it makes repayment to individual creditors, its bankruptcy custodian has the
right to request the people’s court to revoke it, except that the individual repayment may do good to the debtor’ assets.

Article 33

Any of the following acts concerning the assets of a debtor shall be deemed as invalid:

(1)

Concealing or transferring the assets so as to avoid the debts; or

(2)

Fabricating any debt or acknowledging any inauthentic debt.

Article 34

As for any asset of a debtor as obtained under any circumstance as prescribed in Article 31 , 32 or 33 of the present Law, the relevant
bankruptcy custodian shall have the right to recover it.

Article 35

After the people’s court accepts an application for bankruptcy, where any capital contributor of a debtor fails to fulfill its obligation
of capital contribution, the relevant bankruptcy custodian shall require the capital contributor to make full contribution of the
capital it has subscribed to, irrespective of the term for capital contribution.

Article 36

In case any director, supervisor or senior manger takes advantage of his powers to obtain any abnormal income from his enterprise
or embezzles any enterprise asset, the relevant bankruptcy custodian shall recover it.

Article 37

After the people’s court accepts an application for bankruptcy, the bankruptcy custodian may take back its pledge or lien by means
of paying off its debts or providing guarantee that can be accepted by the relevant creditor.

As to the payment of debts or substitutive guarantee, where the value of the pledge or lien is lower than that of the amount of the
creditor’s rights, a bottom line shall be set on the contemporary market value of the pledge or lien.

Article 38

After the people’s court accepts an application for bankruptcy, where what the relevant debtor occupies are not its own assets, the
owner of the assets may take the assets back via the bankruptcy custodian, unless it is otherwise prescribed by the present law.

Article 39

When the people’s court accepts an application for bankruptcy, if the seller has sent the object matter to the debtor of the buyer
and the latter has not yet received the goods and not paid off the price, the seller may take back the goods on the way. However,
the relevant bankruptcy custodian may pay off the price and request the seller to deliver the object matter.

Article 40

Where a creditor is indebted to its debtor before an application for bankruptcy is accepted, it may claim for offset against the
bankruptcy custodian. However, under any of the following circumstances, the relevant debts may not be offset:

(1)

Where a debtor of the debtor obtains the creditor’s rights of any other party against the debtor after the application for bankruptcy
is accepted;

(2)

Where the creditor learns that a debtor is incapable of paying off its due debts or is in the process of applying for bankruptcy
and it is indebted to the debtor, except that the creditor assumes its liabilities in accordance with the provisions of law or for
any reason as incurred 1 year before the application for bankruptcy is filed;

(3)

Where a debtor of the debtor learns that the debtor is incapable of paying off its debts or is in the process of applying for bankruptcy,
and therefore obtains the creditor’s rights from the debtor, except that the debtor’s debtor obtains the creditor’s rights according
to law or for any reason as incurred 1 year before the application for bankruptcy.

Chapter V Bankruptcy Expenses and Community Debts

Article 41

The following expenses that occur after the people’s court accepts an application for bankruptcy shall be the bankruptcy expenses:

(1)

The legal fare on bankruptcy cases;

(2)

The expenses for managing, conversion and distributing the debtor’s assets; and

(3)

The expenses for the bankruptcy custodian’s fulfillment of its functions and duties, for its (their) remunerations and expenses for
the recruitment of employees.

Article 42

The following debts that occur after the people’s court accepts an application for bankruptcy shall be community debts:

(1)

The debts generated when the bankruptcy custodian or debtor requests the opposite party concerned to perform a contract that is not
fulfilled completely by both parties concerned;

(2)

The debts generated from the custodial management of the debtor’s assets;

(3)

The debts generated from improper gains;

(4)

The labor cost for the continuance of business operation, social insurance premiums as well as other debts as incurred therefrom;

(5)

The debts generated from the damage that occurs during the performance of functions and duties by a bankruptcy custodian or other
relevant personnel; and

(6)

the debts generated from any damage due to the debtor’s assets.

Article 43

The bankruptcy expenses and community debts shall be paid off with the debtor’s assets at any time.

Where the debtor’s assets are not enough to pay off all the bankruptcy expenses and community liabilities, the bankruptcy expenses
shall be paid off in priority.

Where the debtor’s assets are not enough to pay off the bankruptcy expenses or community liabilities, the liquidation shall be conducted
in light of the relevant proportion.

Where the debtor’s assets are not enough to pay off the bankruptcy expenses, the relevant bankruptcy custodian shall apply with the
people’s court for terminate the procedures for bankruptcy. The people’s court shall, within 15 days as of the day when an application
is received, decide to terminate the procedures for bankruptcy and announce its decision as well.

Chapter VI Declaration of the Creditor’s Rights

Article 44

The creditor enjoying the creditor’s rights against its debtor, when the people’s court accepts an application for bankruptcy, may
exercise its right pursuant to the procedures as prescribed herein.

Article 45

The people’s court shall, after accepting an application for bankruptcy, decide the time limit for a creditor to declare its creditor’s
rights. The time limit for declaration of the creditor’s rights shall be calculated as of the day when the people’s court announces
its acceptance of the application for bankruptcy within a range of not less than 30 days and not more than 3 months.

Article 46

When the relevant application for bankruptcy is accepted, any undue creditor’s rights shall be deemed as due.

The calculation of the interests of any creditor’s right shall be ceased when the relevant application for bankruptcy is accepted.

Article 47

As for any creditor’s rights attached with certain conditions or time limit or any creditor’s right that fails to be settled through
an action or arbitration, the relevant creditor may declare it.

Article 48

A creditor shall, within the time limit as decided by the people’s court, declare its creditor’s rights against the custodian.

The wages, subsidies for medical treatment and disability and comfort and compensatory funds as owed by a debtor, the fundamental
old-age insurance premiums, fundamental medical insurance premiums that shall have been transferred into the employees’ personal
accounts as well as the compensation for the employees as prescribed by relevant laws and administrative regulations are not required
to be declared, for which the relevant bankruptcy custodian shall make a corresponding checklist upon investigation and make an announcement
on them as well. Where any employee has any objection to the relevant checklist, he may request the bankruptcy custodian to make
corrections. In case the bankruptcy custodian fails to correct it, the relevant employee may lodge a complaint to the people’s court.

Article 49

Where a creditor declares its creditor’s rights, it shall make a written statement on the amount of the creditor’s rights and whether
there is any property guarantee, and submit the relevant evidences as well. In the case of any joint and several creditors’ rights,
an explanation shall be made.

Article 50

The joint and several creditors may choose one of them to declare their creditor’s rights or may declare the creditor’s rights together.

Article 51

Where the guarantor of a debtor or any other related joint and several debtor has paid off the liabilities on behalf of the debtor,
it may declare its creditor’s rights on the basis of its rights to recourse against the debtor.

Where the guarantor of a debtor or any other related joint and several debtor has not yet paid off the debts on behalf of the debtor,
it may declare its creditor’s rights on the basis of its future right to recourse against the debtor, unless the creditors have declared
all the creditor’s rights against the relevant bankruptcy custodian.

Article 52

Where several joint and several debtors are ruled to be subjected to the procedures as prescribed in the present law, the creditors
thereof shall have the right to declare their whole creditors’ rights in each bankruptcy case respectively.

Article 53

Where a bankruptcy custodian or creditor unchains a contract in accordance with the provisions of the present law, the opposite party
concerned may declare its creditor’s rights on the basis of the right to compensation for the damage as generated therefrom.

Article 54

Where a debtor is the entrusting party of an entrustment contract which has been ruled to be subjected to the procedures as prescribed
in the present law, if the entrusted party has not learned the aforesaid facts and continues to deal with the entrusted business,
the entrusted party may declare its creditor’s rights on the basis of the rights of claim as generated therefrom.

Article 55

Where a debtor is a remitter of bills which have been ruled to be subjected to the procedures as prescribed in the present law, if
the relevant payer of the bills continues its payment or acceptance, the payer may declare its creditor’s rights on the basis of
the rights of claim as generated therefrom.

Article 56

Within the time limit for declaration of the creditor’s rights as decided by the people’s court, if the creditor fails to claim its
creditor’s rights, it may supplement its declaration before the final distribution of insolvent assets. However, if the relevant
distribution has already been made, no more declaration may be supplemented. The expenses for examining and confirming the supplementary
declaration of the creditor’s rights shall be borne by the party who has applied for supplementary declaration.

Where a creditor fails to declare its creditor’s rights in accordance with the provisions of the present law, it may not exercise
the relevant right pursuant to the procedures prescribed in the present law.

Article 57

Where a bankruptcy custodian receives the declaration materials on the creditor’s rights, it shall register them into a book, conduct
an examination on the declared creditor’s rights and formulate a form of the creditor’s rights as well.

The form of the creditor’s rights and the declaration materials of the creditor’s rights shall be kept by the relevant bankruptcy
custodian for reference by the interested parties.

Article 58

The form of the creditor’s rights formulated pursuant to the provisions of Article 57 of the present law shall be submitted to the
first meeting of creditors for examination.

Where the relevant debtors and creditors have no objection to the form of the creditors’ rights, it shall be ruled and confirmed by
the people’s court.

Where any debtor or creditor has any objection to the form of the creditors’ rights, it may file an action to the people’s court that
has accepted the application for bankruptcy.

Chapter VII The Meeting of Creditors

Section I Common Provisions

Article 59

The creditor declaring its creditor’s rights according to law shall be a member of the creditors’ meeting, and have the right to
attend the creditors’ meeting and enjoy the right to vote.

Any creditor whose creditor’s right has not yet been decided may not be enpost_titled to exercise its right to vote, unless the people’s
court can temporarily decide the amount of the creditor’s right for the sake of exercising the right to vote.

Any creditor, which has the right to make guarantee on the particular assets of its debtor and has not given up the priority right
to be repaid, may not enjoy the right to vote for any matter as prescribed in Item (7) or (10) paragraph 1 of Article 61 of the
present law.

A creditor may entrust its agent to attend the creditors’ meeting and exercise the right to vote. When an agent attends the creditors’
meeting, it shall submit a Power of Attorney to the people’s

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