Research On Several Questions About Bankrupt Creditor's Rights Confirmation System

With the development of the market economy and the attack of the global financial crisis ,the number of bankrupt enterprises in China has skyrocketed with increasing complexity, making the corporate exit mechanism more and more important. An enterprise, as the most active organism of market economy ,also concerns the interests of multiple parties in its market exit. The creditor of a bankrupt enterprise can only be repaid according to the distribution scheme set down in the bankruptcy procedures after his/her proof of debts has been duly verified. Improving the legal system for verifying proof of debts and the exit mechanism for enterprises not only serves to maintain the market order but also reduce social risk and enhance the stability and harmony of society. This article will deal with the theoretical foundation and the operating procedure for verifying proof of debts in the following five parts.The first part concerns the fundamental legal issues of creditor's rights in bankruptcy setting. According to the legislation of various countries and areas, the creditor's rights generally has broad and narrow meanings. The main difference is a narrow definition of creditor's right would exclude the exemption right. Only after clearly defining creditor's right, can we ascertain the range of creditors and determine who is qualify for compensation. To understand the meaning of creditor's right in bankruptcy setting, we should consult with relevant regulations concerning the range and legal characteristics thereof.The second part deals with issues related to the examination of proof of debts by the administrator. To examine proof of debts is the administrator's major job and the prerequisite and foundation of ascertaining the creditor's rights. The author thinks the administrator shall examine the proof of debts both in form and in substance because both the review by the creditors'meeting and the adjudication by the court are based on the creditor's claims table compiled by the administrator.In the author's opinion, although not required by the current bankruptcy law, the administrator should issue opinions concerning the proof of debts. Doing so would help clarify the occurrence and development of the debt, solidify the examination results and most importantly, benefit the review at the creditors'meeting. To issue such opinion, the administrator shall examine the proof in substance. In this part, the author also pays attention to the examination of some special debts such as breach penalties and taxes.The third part discusses the review of proof of debts at the creditor's meeting, including the time of review, the body of review, the way to review and the review of some special debts. The author thinks that review of proof of debts shall not be limited to the first creditor's meeting. The administrator may arrange review at the subsequent creditor's meeting according to the complexity of the debt. Also, to solve the voting problems at the previous creditor's meeting, the administrator shall apply to the court for interim determination of the amount payable to uncertain creditors.To guarantee the review right of the creditor's meeting, the author proposes that in addition to the creditor's claims table, administrator should also compile related material including the reason for the debt, the examination process and the basis of verification for submission to the creditor's meeting. Meanwhile, if the creditors think it difficult to reach conclusions at the creditor's meeting, the creditors shall be entitled to continuing review and objection within a certain period after the creditor's meeting. According to the spirit of Enterprise Bankruptcy Law, the creditor's meeting does not have to determine creditor's rights by voting. The creditors should realize their objection right through litigation and should be presumed to have consented if they have not filed actions to challenge the review result within a certain period.The fourth part involves the determination of creditor's rights through court adjudication. Creditors participate in bankruptcy procedures in three important aspects: to attend the creditor's meeting, to file actions concerning the debt review, and to participate in distribution of assets. Creditors are entitled to assets distribution only after the court determines the creditor's rights. In another word, court adjudication would be the sole basis of assets distribution.According to Enterprise Bankruptcy Law, the court can only adjudication on those claims in the creditor's claims table to which no objections are raised, including enforceable creditor's right. The court shall set a definite and short period for filing objection suits to further the bankruptcy and liquidation procedure. In determining the creditor's rights, the court need only to conduct a formal not substantive examination of the creditor's claims table compiled by the administrator and reviewed by the creditor's meeting.The fifth part discusses the remedy for determination of creditor's right. Creditors are entitled to challenge the administrators'determination of creditor's right by filing legal actions. To prevent long-time uncertainty of creditor's right, the author advises against applying the usual two-year statute of limitation to the creditors'objection suit. The parties thereto shall be the creditors and the debtor; the administrator is generally the litigation representative of the debtor, except where the debtor objects to the creditor's claims table. The creditor shall file the objection suit, including the suit against enforceable creditor's right, with the court which accepts the bankruptcy application. The suit against the enforceable creditor's right shall not apply the judicial supervision procedures, instead, the creditors need only bring such suit within certain time limit after the creditor's meeting.