A TALE OF TWO ANCIENT ECONOMIES: CHINA & INDIA – BANKRUPTCIES AND RESTRUCTURING

A TALE OF TWO ANCIENT ECONOMIES: CHINA & INDIA – BANKRUPTCIES AND RESTRUCTURING

CHAIR: Alan CW Tang

Professor Li Shuguang Mr. Kirtee KapoorDr. Yin Zhengyou Mr. Sajeve Deora

24 March 2014

In the beginning: debtor-creditor relationship

• Traditional cultural stigma

• Pejorative associations

• Confucianism teachings

• Family and caste systems

• All debts must be paid

P. 1

Break through: the 1st laws

• 1848 (India) vs 1906 (China)

• How these laws came about?

• Law vs culture / stigma

• International trade, market-led economies

• Economic reform

P. 2

The current laws

India:

• 1956 and 2013 Companies Acts

• SICA / RDDBFI / SARFAESI / Relief Undertakings

• Provincial Insolvency Act 1920?

China:

• 1986 and 2006 Enterprise Bankruptcy Law (PRC)

• Supreme People’s Court Judicial Interpretations

P. 3

How the laws have fared – India?

BIFR registrations from 1987 to till date – 5,962 nos.

Recovery through various channels INR, Bil

Source: Report on Trend and Progress of Banking in India 2012-13

CDR References (up to December 31, 2013)

Source: CDR Office

Debt Recovery %

Lok Adalat 66 4 6.1

RDDBFI 310 44 14.0

SARFAESI 681 185 27.1

Particulars Received Not admitted

Under considera

tion

Total approved

Caseswithdrawn

Casesexited

Livecases

Nos. 605 105 57 443 115 69 259

Debt, INR Bil

4,076 528 654 2,892 290 526 2,076

P. 4

How the laws have fared – PRC?

98 32 117

728 710

1625

2583

58755396

7746

5622

7219

91108615

7673

5928

4328

4253

3817

3139

3128

3567

2531

2100

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

89 90 91 92 93 94 95 96 97 98 99 20 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

No. of cases

Year

New Enterprise Bankruptcy Cases in the PRC from 1989 - 2012

Note:

The 2007 figure includes cases under the 1986 Law;

From 2008 all cases under 2006 Law

Source: Bankruptcy and Restructuring Law Research Centre, University of China Politics and Law

P. 5

How the laws have fared – India & China?

• Success or failure, or … ?

• Government support or hindrances?

• The legal system and interplay with other laws

• Cultural stigma still a problem?

• Abuse of the law?

P. 6

Something new – China: the Credit Investigations Industry

• January 2013 – Regulations on the Administration of Credit Investigation

• Establishment of personal credit reference agencies

• Small & Medium Enterprises (SMEs) and individuals are starting to have greater access to credit.

P. 7

Something new – India

• Deal with stress at incipient stage

• Collective schemes under stricter control

• More private banks; consolidation

• Specialist services engaged for recovery

• Role of Administrators

• Liberal environment for ARC’s

P. 8

International interplay - China

• Cross-border provisions of EBL

• Impact of UNCITRAL Model Law

• Recent cases and lessons to learn, e.g. Suntech, [Li and Yin to add names of others]

P. 9

International interplay - India

• Cross-border provisions of Companies Act

• Impact of UNCITRAL Model Law

• Recourse to overseas guarantors

• Foreign decrees / awards

• Statutory process is main proceeding

• Concessions to revival

• Change of control of defaulters

P. 10

Prospects and development – China & India

• Restructuring vs bankruptcy

• Creditor vs debtor protection

• Specialised Bankruptcy Courts and insolvency profession

• International aspects

• Adoption of UNCITRAL Model Law?

P. 11