On The Construction of Specialized Reorganization Proceedings for MSEs

The “small” and “micro” nature of micro and small enterprises endows them with unique legal characteristics in their management structure and operation. The current bankruptcy law, which sets up standard reorganization procedures for large- and medium-sized enterprises, has many regulatory mismatches for the reorganization of micro and small enterprises facing debt difficulties. The United Nations Commission on International Trade Law’s “Draft Legislative Guide on Insolvency Law for Micro and Small Enterprises” and the World Bank’s “Business Ready” assessment both advocate for the establishment of specialized reorganization proceedings for micro and small enterprises within bankruptcy laws. Many foreign countries have also established special reorganization rules for micro and small enterprises in their revisions of bankruptcy laws. Based on the international specialized legislative trend for bankruptcy reorganization of micro and small enterprises internationally, as well as the judicial exploration of rapid reorganization of micro and small enterprises by domestic courts, it is necessary for China to add a special reorganization procedure for micro and small enterprises in the revision of the Enterprise Bankruptcy Law . To construct a special restructuring procedure for micro and small enterprises, it is necessary to consider establishing special restructuring rules that differ from ordinary restructuring procedures in terms of applicable conditions for initiation, restructuring governance structure, formation of restructuring plans, and coordination of different procedure conversions. The establishment of special reorganization rules for micro and small enterprises is not only a complement to the bankruptcy reorganization system, but also a contribution to the realization of corporate governance goals under the Chinese path to modernization.