Learning Enforcement Lessons in China

Corporate Finance & Restructuring

June 5, 2015

Much has been written and discussed regarding the structural subordination of an offshore lender and investor. Yes, it is much harder to participate in an onshore restructuring for any investor/lender that has their exposure through an offshore vehicle. That is hardly new news.

What is new however, is the steps that many offshore parties are taking to leave themselves better placed if there is a default, the lessons that can be learned from past strategies employed and what experience shows is the best way to achieve results.

In this article we explore the enforcement environment in China from the angle of the foreign investor or lender and the key lessons that have been learnt.

Gaining Control in China — It Is Getting Better

The bane of the existence of the insolvency practitioner appointed to an offshore company is often getting control of the onshore business following the occurrence of a default. This has often been difficult and problematic where the existing Legal Representative refuses to hand over the chops and business license of the onshore company. Faced with such resistance, the insolvency practitioner is generally forced to apply to the relevant Chinese Court to have resolutions they have passed appointing a new Legal Representative declared valid by the Court and seek to have new chops made.

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