On February 8, 2022, the Shanghai Pudong New Area People’s Court ruled to accept the bankruptcy and restructuring case of Shanghai Shengnan Industrial Development Co., Ltd. (“Shengnan Industrial”) and appointed Fangda as the administrator on February 17, 2022, following the request of the bankruptcy applicant. This is a groundbreaking case:

• The first bankruptcy and restructuring case under new legislation in which the court appointed the administrator according to the request of the applicant.
• The first bankruptcy and restructuring case handled by the Bankruptcy Adjudication Tribunal of the Shanghai Pudong New Area People’s Court since its official launch on January 7, 2022.

On June 10, 2021, the 29th meeting of the 13th National People’s Congress Standing Committee issued the Decision on Authorizing the Shanghai Municipal People’s Congress and its Standing Committee to Formulate Regulations of Pudong New Area. On this basis, the 37th meeting of the 15th Shanghai Municipal People’s Congress Standing Committee passed the Several Provisions on Improving the Market-oriented and Law-based Enterprises Bankruptcy System in Shanghai Pudong New Area, which stipulates that the Shanghai Pudong New Area People’s Court shall establish a bankruptcy adjudication tribunal as its internal institution to have centralized jurisdiction over bankruptcy and compulsory liquidation cases designated by the Shanghai High People’s Court; at the same time, it is provided for that when a creditor or debtor files a bankruptcy application, the applicant may nominate an administrator in writing.  The provisions took effect from January 1, 2022.

With the consent of the Supreme People’s Court of the People’s Republic of China, the Shanghai High People’s Court approved the Pudong New Area People’s Court to have jurisdiction over compulsory liquidation and bankruptcy cases in which the enterprises’ domicile are located in the Shanghai Pudong New Area and the Lingang Special Area of China (Shanghai) Pilot Free Trade Zone (with the exception of jurisdiction falling within the Shanghai Financial Court).

The new provisions on the bankruptcy system in Shanghai Pudong Area have achieved a number of institutional innovations. A key innovation is that an administrator can be appointed by the court based on the nomination by the applicant of the bankruptcy case, which will help to identify the professional institution that is familiar with and fit for the particular case. That should lead to better use of judicial resources and market knowledge to help increase the chances of companies in financial distress being rescued through restructuring. Such innovative rule will also play a guiding role for the professional institutions acting as administrators to pay attention to distressed enterprises and duly “make prescriptions” at an early stage.

There is a project involving the building of a care home by Shengnan Industrial, which fell into financial difficulties. The Fangda team carried out thorough research on the company’s financial position, coordinated with creditors, debtor, restructuring investors and other parties, and conducted multiple rounds of negotiation. We facilitated a preliminary agreement which has been widely praised.

As the restructuring proceeds, the outlook for Shengnan Industrial to resolve its debts and have an asset recovery is good. As the administrator, Fangda will continue to carry out its role diligently and conscientiously.

In this case, our partner Nuo Ji acted as the general coordinator, partner Kai Li acted as the team leader of bankruptcy team, and counsel Wang Zhang acted as executive leader. Team members also included Sylvia Zhang, Morissa Zhang, and Rebecca Cao.

Besides acting as the administrator of Shengnan Industrial, Fangda also recently achieved successful restructurings of Bestway Marine & Energy Technology Co., Ltd. (300008.SZ), Dalian Shipbuilding Industry Offshore Co., Ltd., Shanghai Yuehe Real Estate Co., Ltd., Fujian Start Group Co., Ltd. (600734.SS), and ZK Engineering & Development Corporation Headquarters, as the administrator of the enterprises.

Fangda has extensive practical experience in bankruptcy and restructuring and is renowned for handling large and complex bankruptcy projects. Fangda is the first-level administrator of the Shanghai High People’s Court and the out-of-province administrator of the Zhejiang High People’s Court. Our bankruptcy and restructuring lawyers often work closely with our lawyers in banking, capital markets, M&A, real estate, labor, intellectual property, and dispute resolution to deliver comprehensive legal solutions for our clients.