Viewpoint | How the administrator reviews claims that have exceeded the time limit for applying for enforcement

According to the first paragraph of Article 250 of the the People's Republic of China Civil Procedure Law (hereinafter referred to as the Civil Procedure Law, as revised in 2023): "The period of application for enforcement is two years. The suspension and interruption of the limitation of enforcement shall be governed by the provisions of the law on the suspension and interruption of the limitation of action." According to this provision, if a creditor applies for enforcement, it is required to file an application within two years after the judgment document takes effect.

According to the Supreme People's Court on the application<中华人民共和国民事诉讼法>The first paragraph of Article 481 of the Interpretation of the Civil Procedure Law (hereinafter referred to as the Judicial Interpretation of the Civil Procedure Law): "If the person applying for enforcement applies to the people's court for compulsory execution beyond the time limit for applying for execution, the people's court shall accept it. If the person subject to execution objects to the period of limitation of application for execution, the people's court shall, after examination, decide not to execute the objection." According to this provision, the debtor has the right to defend the claims beyond the period of application for execution, and the people's court shall rule not to execute the claims without interruption or suspension.

According to the Supreme People's Court on the application<中华人民共和国企业破产法>Article 6 of the (III) of Provisions on Certain Issues (hereinafter referred to as Judicial Interpretation III of the Bankruptcy Law): "The administrator shall register the declared claims in accordance with the provisions of Article 57 of the Enterprise Bankruptcy Law, and record in detail the name of the applicant, Unit, agent, amount of declared claims, guarantee status, evidence, contact information and other matters to form a creditor's rights declaration register. The administrator shall, in accordance with the provisions of Article 57 of the Enterprise Bankruptcy Law, examine the nature, amount, secured property, whether it has exceeded the limitation period of action, whether it has exceeded the period of enforcement, etc., prepare a creditor's rights form and submit it to the creditors' meeting for verification. According to this provision, if the creditor's declaration is confirmed by the effective judgment but exceeds the creditor's rights declaration during the application for enforcement, the administrator shall register, and in accordance with the law, whether the claim exceeds the period of application for execution is reviewed; however, the current law does not specify whether the administrator can not confirm the claim because the claim exceeds the period of application for execution at the time of review.

The reason for this view is that insolvency proceedings are different from enforcement proceedings, and the loss of the protection of enforcement proceedings does not necessarily mean the loss of the protection of insolvency proceedings. One of the differences between enforcement proceedings and insolvency proceedings is that enforcement, as a compulsory procedure, has an application for enforcement period and loses the protection of coercive force after expiration, but in insolvency proceedings, the declaration and distribution of claims are subject to the provisions of the bankruptcy law. That is, although the claim has exceeded the statute of limitations for enforcement and has lost the protection of enforcement, the claim itself still exists and is not extinguished by the expiration of the statute of limitations. The view is that if there are two identical claims, one of which is confirmed by a court decision but exceeds the statute of limitations for application for enforcement, but the other is not prosecuted and has not expired, it is clearly contrary to the principle of fairness if the previous one is not confirmed and the latter is confirmed. In the review of the administrator's claims, the substantive review of claims that exceed the time limit for application for enforcement should be re-examined in substance from the point of view of protecting the interests of creditors.

The reason for this view is that insolvency proceedings have the characteristics of general enforcement, the right to be protected by law has exceeded the statute of limitations for enforcement, and there is no question of losing power in enforcement proceedings and reinstating power in insolvency proceedings. If the creditor's right is beyond the period of enforcement, the debtor has the right to raise a defense; the liquidation of debts through bankruptcy procedure belongs to the broad scope of public relief. Since the debtor can invoke the defense of limitation or the defense of exceeding the period of enforcement in the litigation stage or the enforcement stage, the debtor's defense of limitation or the defense of exceeding the period of enforcement should be safeguarded in the special state of bankruptcy procedure, the right of creditors to realize their claims by public means is not revived by the commencement of insolvency proceedings. In insolvency proceedings, the administrator is a general legal act on behalf of the debtor, and its claims beyond the statute of limitations or beyond the period of enforcement are not recognized as insolvency claims, in fact, on behalf of the debtor to exercise the corresponding defense rights. This view also holds that the bankruptcy law has no special protection for creditors who are lazy in exercising their rights through enforcement procedures; if they are protected in favor of others, they will crowd out the shares of other creditors' compensated property, seriously damage the interests of other creditors, cause serious injustice to other creditors, and undermine the principle of fair debt settlement in enterprise bankruptcy law.

Item (VII) of Article 54 of the Guidelines for the Examination and Determination of Creditor's Rights in Bankruptcy Cases of Shenzhen Intermediate People's Court (SZF [2017] No. 5) stipulates: "The following claims declared by creditors shall not be determined: (VII) claims that have exceeded the statute of limitations, Claims that have not applied for enforcement within the time limit prescribed by law......"

Article 29 of the Operational Guidelines for the Declaration and Review of Bankruptcy Administrator's Creditor's Rights by Jiangsu Bankruptcy Administrator Association, Jiangsu Lawyers Association and Jiangsu Institute of Certified Public Accountants stipulates: "The following claims declared by creditors are not bankruptcy claims: 5) Claims that exceed the statute of limitations, claims that exceed the time limit prescribed by law and have not applied for enforcement;......"

Article 13 of the Guidelines for the Declaration and Examination of Creditor's Rights in Bankruptcy Cases issued by the Beihai Bankruptcy Administrators Association stipulates: "The administrator shall examine the substantive contents of the creditor's rights declaration according to the following principles: (1) If there is an effective legal document to confirm the creditor's rights, the creditor's rights shall be confirmed according to the effective legal document, but the creditor's rights exceeding the time limit for applying for execution shall not be included in the bankruptcy creditor's rights......"

1. "Song Jie, Shenzhen Gold Industry Group Co., Ltd. Bankruptcy Creditor's Rights Confirmation Dispute Civil Application Retrial Review Civil Ruling Letter"-(2022) Yue Min Shen No. 445

The Higher People's Court of Guangdong Province held that: "...... asserting that its creditor's rights have been determined by effective legal documents should be confirmed by applying the provisions of Article 7 of the (III) of the Supreme People's Court on Several Issues Concerning the Application of the the People's Republic of China Enterprise Bankruptcy Law. The court held that the application of law is systematic and the confirmation of creditor's rights by effective legal documents is not the only condition for the creditor's rights to be confirmed in bankruptcy proceedings, it is necessary to meet other conditions stipulated by law at the same time. In this case, the creditor's rights involved in the case exceeded the time limit for execution. Song Jie's claim has no legal basis and this court will not accept it".

2. "VincentLuc and Guangxi shengjing real estate development co., ltd. bankruptcy creditor's rights confirmation dispute second instance judgment"-(2019) GUI 03 min zong no 3004

The Intermediate People's Court of Guilin City, Guangxi Zhuang Autonomous Region, held that: "Whether the declared creditor's rights exceed the period of enforcement is one of the review contents of the bankruptcy administrator. If it is understood by the appellant"... All the creditor's rights determined by the effective legal documents should be recognized as bankruptcy creditor's rights ", then there is no need for the law to stipulate that the administrator should review whether the declared creditor's rights exceed the period of enforcement, therefore, claims beyond the period of enforcement should not be recognized as insolvency claims. In this case, the appellant did not apply to the court for enforcement within two years after the mediation agreement became effective. Therefore, after examination, the bankruptcy administrator determined that the appellant's bankruptcy claim was not established and had factual and legal basis, and the court confirmed it."

3. "Civil Judgment of Second Instance on Dispute over Confirmation of Bankruptcy Creditor's Rights between Jiangsu Chunchen Flour Co., Ltd. and Chen Guoning Employees"-(2020) Su 08 Min Zhong No. 1718

The Intermediate People's Court of Huai'an City, Jiangsu Province held that: "...... bankruptcy claims are generally paid off, and claims confirmed by effective judgments beyond the period of enforcement are not bankruptcy claims. The bankruptcy administrator has the right to examine whether the declared creditor's rights exceed the period of enforcement. If it finds that the creditor's rights involved in the case have not been applied for enforcement within the specified time, it will make a change notice of non confirmation of the creditor's rights. It is a performance of diligence and due diligence to safeguard the interests of all creditors, and it is not a violation of the principle of good faith". This case is one of the eight typical bankruptcy cases of Huai'an Intermediate People's Court in 2020.

4. "Jiangsu Qingsheng Laboratory Equipment Co., Ltd. and Shanghai Shentong Pipeline (Yancheng) Co., Ltd. Civil Judgment of Second Instance on Bankruptcy Creditor's Rights Confirmation Dispute"-(2021) Su 09 Min Zhong No. 6243

The Intermediate People's Court of Yancheng City, Jiangsu Province held that "the right of public relief is lost when the creditor's rights exceed the period of enforcement, and the settlement of debts through bankruptcy proceedings belongs to the category of public relief. Article 6 of the (III) of the Supreme People's Court on the Application of Certain Issues stipulates that the administrator shall, in accordance with the provisions of Article 57 of the Enterprise Bankruptcy Law, examine the nature, amount, secured property, whether the limitation period of action has been exceeded, whether the period of enforcement has been exceeded, prepare a claim form and submit it to the creditors' meeting for verification. Therefore, claims that exceed the period of enforcement should not be included in the bankruptcy claims table and are not bankruptcy claims."

5. "Shanghai Dongdeng Real Estate Co., Ltd. and China Minsheng Bank Co., Ltd. Shanghai Branch Bankruptcy Creditor's Rights Confirmation Dispute First Instance Civil Judgment"-(2021) Hu 03 Min Chu 535

The Third Intermediate People's Court of Shanghai held that: "The bankruptcy procedure belongs to the judicial procedure accepted by the people's court for the centralized liquidation of the debts of bankrupt enterprises. If the creditor's rights exceed the limitation of action or exceed the limitation of execution, they lose the right to be protected by legal force. According to the provisions of Article 6, paragraph 2, of the Interpretation III of the Bankruptcy Law, the administrator shall, in accordance with the provisions of Article 57 of the Enterprise Bankruptcy Law, examine the nature, amount, secured property, whether the limitation period of action has been exceeded, whether the period of enforcement has been exceeded, prepare a claim form and submit it to the creditors' meeting for verification. Accordingly, if the declared claim exists beyond the statute of limitations or the period of enforcement, it should not be recognized. Therefore, the claims declared by Minsheng Bank should not be confirmed in the bankruptcy proceedings of Dongdeng Company because it did not apply to the enforcement court for resumption of enforcement within the statutory enforcement period and thus exceeded the statute of limitations."

6. "Jiako Solar Silicon (Longyan) Co., Ltd., Longyan Hongyuan Wood Industry Co., Ltd. General Bankruptcy Creditor's Rights Confirmation Dispute Civil First Instance Civil Judgment"-(2022) Min 0802 Min Chu No. 622

The People's Court of Xinluo District of Longyan City held: "...... The administrator shall confirm the claims determined by the effective civil judgment, but the administrator shall also have the right to adjust the claims determined by the effective civil judgment declared by the creditors in accordance with the provisions of the Enterprise Bankruptcy Law, and shall adjust the claims after examination of whether the claims exceed the limitation period, whether they exceed the period of enforcement, etc. In the opinion of the Court, the enterprise bankruptcy law does not specify whether claims beyond the period of enforcement are bankruptcy claims, but both the period of enforcement and the period of limitation of action have lost the effect of enforcement in terms of legal consequences, so it can be determined by reference to claims beyond the period of limitation of action to determine whether they are bankruptcy claims. The first paragraph of Article 61 of the Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Enterprise Bankruptcy Cases stipulates: 'The following claims are not bankruptcy claims: ...... (VII) claims that have exceeded the statute of limitations; '...... Accordingly, claims that have exceeded the statute of limitations period are not bankruptcy claims, and therefore claims that have exceeded the period of enforcement should not be bankruptcy claims. In this case, because Hongyuan Company failed to prove that the claims in the case it enjoyed existed in the period of enforcement of the application for suspension or interruption of the statute of limitations, the declaration of the claims in the case had exceeded the period of enforcement and was not a bankruptcy claim. The administrator of Jiako did not confirm the claims involved in the case, in accordance with the law."

7. "Fuzhou Xinyang Maritime Company Consulting Service Co., Ltd. and Fujian Guanhai Shipping Co., Ltd. Bankruptcy Creditor's Rights Confirmation Dispute First Instance Civil Judgment"-(2020) Min 0122 Min Chu No. 2159

The People's Court of Lianjiang County held that: "According to the Supreme People's Court on the application of<中华人民共和国企业破产法>Article 6 of the (III) on Certain Issues provides that the administrator shall, in accordance with the provisions of Article 57 of the Enterprise Bankruptcy Law, examine the nature of the claim, the amount, the secured property, whether it has exceeded the statute of limitations period, whether it has exceeded the period of enforcement, etc. The two payments in this case have exceeded the enforcement period, so there is nothing wrong with the Guanhai maritime manager not recognizing the claims in dispute."