Tips on legal risks
All properties that belong to the debtor at the acceptance of the bankruptcy application and the properties that the debtor has obtained between the acceptance of the bankruptcy application and the conclusion of the bankruptcy procedures are the properties of the debtor
[Basic facts]
On February 27, 2019, the people’s court decided to accept the creditor’s application for the bankruptcy and liquidation of Company A, and appointed an administrator by law. Before the people’s court decided to accept the application for Company A’s bankruptcy and liquidation, Company A and some buyers of properties had already applied for the judicial affirmation of their mediation agreements; after the people’s court decided to accept the application for Company A’s bankruptcy and liquidation, Company A, without notifying the administrator, applied with some buyers of properties for the judicial affirmation of their mediation agreements or reached mediation agreements in litigation. In the agreements above, 5,250,336 yuan in balance of the property purchase price is involved. To receive this money, Employee X of Company A, as instructed by Y, the legal representative of Company A, opened an escrow account with the property buyers. When payments were made into the account, none of them was transferred to Company A’s account. The administrator then sued Y and X to return the balance of the property purchase price of 5,250,336 yuan.
[Rationale of the people’s court]
According to the Enterprise Bankruptcy Law of the People’s Republic of China, Article 30, “A debtor’s property includes all of the property that belongs to a debtor when the application for bankruptcy is accepted, as well as the property as obtained by the debtor during the period from the time when the application for bankruptcy is accepted to the time when the procedures for bankruptcy are concluded”, and Article 36, “The administrator shall recover the irregular incomes obtained from the enterprise and the property of the enterprise illegally taken into his possession by a director, supervisor or senior manager of the debtor through taking advantage of his position.” The balance of the property purchase price, 5,250,336 yuan, as affirmed by the judgement document before and after the acceptance of the application for Company A’s bankruptcy and liquidation, is the property of Company A. Y, as the legal representative, chairman of board and general manager, controlling, occupying and using Company A’s balance of property purchase price is not justifiable in law. Therefore, the administrator’s request that Y return 5,250,336 yuan should be supported. X opened the escrow account with property buyers under the instruction of Y, therefore, his act was not a personal one; upon receiving such payments, X, instead of using the money personally, paid the money as instructed by Y to the relevant persons. Therefore, the administrator’s request the X bear the obligations to return the money was not supported.
[Tips on legal risks]
After the people’s court has decided to accept a bankruptcy application and appointed an administrator, the administrator performs by law the duties of managing and disposing of the debtor’s property, deciding on the debtor’s internal affairs, and represents the debtor to participate in litigations. The directors, supervisors and senior managers should hand over the company’s property to the administrator, and may not, without authorization, make decisions on the company’s internal business or represent the company to attend litigations.
