20 ALB CHINA INSOLVENCY & RESTRUCTURING GUIDE 2023 INITIATION AND IMPLEMENTATION OF THE REORGANIZATION PROCEDURE 3 CHAPTER [1] Refer to civil ruling documents No. (2019) Hu 7101 Po 62 and No. (2019) Hu 7101 Po 62-1. [2] Refer to Article 7 of the Beijing Bankruptcy Court Standards for Handling Bankruptcy Reorganization Cases (Trial), Part 9, Article 2 of the Jiangsu Provincial High People's Court Guidelines for the Trial of Bankruptcy Cases (Su Gao Fa [2017] No. 794), Section 2(1) Article 4 of the Hainan Provincial High People's Court Procedural Guidelines for Enterprise Bankruptcy Cases (Qiong Gao Fa [2019] No. 257), and Part 8, Article 3 of the Shanghai Municipal High People's Court Guidelines for Bankruptcy Trial Work (Trial) (Hu Gao Fa Min Er [2018] No. 9). 1. Initiation of the Reorganization Procedure 1.1 Applicant for Reorganization 1.1.1 Applicants for the Revival against General Debtors According to Article 70 of the Enterprise Bankruptcy Law of the People's Republic of China (hereinafter referred to as the Enterprise Bankruptcy Law), a debtor or creditor may directly apply with the people's court for revival against the debtor, known as the initial reorganization application. Where any creditor applies for bankruptcy liquidation, after the people’s court accepts the application and before the debtor is announced bankrupt, the debtor or its capital contributors whose capital contribution makes up one-tenth or more of the debtor’s registered capital (hereinafter referred to as "competent capital contributor") may, apply for revival, known as the subsequent reorganization application. A competent capital contributor could be a single capital contributor with more than one-tenth of the registered capital or multiple capital contributors collectively holding more than one-tenth of the registered capital. The reorganization case of Shanghai Nanyang Electric Motor Co., Ltd. (hereinafter referred to as "Nanyang Electric") is a prime example of a transition from bankruptcy liquidation to revival[1]. Shanghai Electric (Group) Corporation (hereinafter referred to as "Electric Group"), which holds 60% of Nanyang Electric's shares, applied for its bankruptcy liquidation as a creditor. In the bankruptcy liquidation procedure, considering Nanyang Electric's value for reorganization, the Electric Group, in the capacity of a capital contributor with more than one-tenth stake, applied for the revival against Nanyang Electric. According to Article 70 of the Enterprise Bankruptcy Law, subsequent reorganization applications apply only to cases where creditors apply for bankruptcy liquidation; capital contributors are not permitted to make initial reorganization applications, and creditors are not allowed to submit subsequent reorganization applications. However, in practice, local courts' working guidelines on bankruptcy reorganization have variously expanded their applicability. In regions like Beijing, Jiangsu, Hainan, and Shanghai, subsequent reorganization applications are applicable to cases of bankruptcy liquidation filed by creditors and debtors. In Jiangsu and Shanghai, if a resolution at the creditors' meeting is passed, creditors can make subsequent reorganization applications. Furthermore, Beijing has made it explicit that creditors may directly submit subsequent reorganization applications[2]. According to the Summary of the Symposium on the Work of Bankruptcy Reorganization Cases of Listed Companies by the Supreme People's Court (Fa [2012] No. 261,
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