º¬Ðß²ÝÉçÇø

In an enforcement case arising from a guarantee contract dispute, the creditor, a securities company, applied to the court for compulsory enforcement, requesting that the guarantor, named Chen, assume joint and several guarantee liability for the debt not paid by the debtor, a partnership enterprise.

Subsequently, the debtor entered into bankruptcy reorganisation proceedings. The reorganisation plan proposed by the bankruptcy administrator included exemption of the guarantor¡¯s liability and was approved by the court.

Based on this, Chen believed that his guarantee liability had been discharged and requested the court to terminate the enforcement case.

In response, the securities company raised an objection, arguing that the reorganisation plan could not extinguish the creditor¡¯s right to claim from the guarantor.

The case centred on whether the securities company retained the right to recourse against the guarantor, Chen. The court ultimately ruled in favour of the securities company¡¯s claim, ruling that Chen remained liable for fulfilling the guarantee obligation.

This article analyses the core legal issues in this particular enforcement objection case, exploring the legal relationship between creditors and guarantors in bankruptcy proceedings and providing insights for defining guarantee liability in bankruptcy reorganisation.

Q: Can the bankruptcy reorganisation plan discharge guarantor Chen¡¯s liability?

A: Article 92.3 of the Enterprise Bankruptcy Law stipulates that the right enjoyed by a creditor against the debtor¡¯s guarantor and all the joint and several debtors shall not be affected by the reorganisation plan.

On this basis, some argue that provisions in the reorganisation plan discharging the guarantor¡¯s liability cannot bind creditors. Even if the reorganisation plan is approved by the court, creditors may still demand that the guarantor fulfils their obligations.

The authors believe this involves two distinct issues:

(1) Interpretation of article 92.3. This provision does not prohibit the inclusion of guarantor liability discharge clauses in the reorganisation plan, or deem such clauses invalid. Its intent is to clarify that when creditors agree to reduce or waive claims against the debtor for the sake of reorganisation, and the reorganisation plan does not adjust the guarantor¡¯s liability, the guarantor remains liable for the waived portion.

(2) Legal effect of approved guarantor liability discharge clause on creditors. In this case, the court stated: ¡°Adjustments to guarantor liability are not an essential component of a bankruptcy reorganisation plan. Issues involving third-party liability, such as creditors and guarantors, should be resolved through separate negotiations outside collective bankruptcy procedures. Such matters should not be subject to reorganisation plan voting. A reorganisation plan cannot extinguish creditors¡¯ statutory rights against guarantors through majority voting, as this would contradict the purpose of guarantees.¡±

The authors hold that if such clauses are indispensable to the reorganisation plan¡¯s success and interested creditors¡¯ consent to them, their validity should be recognised. Conversely, if such clauses lack necessity or legitimacy and are opposed by creditors (who fail to block them due to insufficient voting power), they should not bind dissenting creditors.

Additionally, the securities company pointed out that among the three secured creditors, two held rights to demand Chen¡¯s guarantee liability, while the third did not. Thus the third should not vote on it. The authors agree with the securities company. Proper creditor grouping is crucial to safeguarding rights.

In summary, a reorganisation plan cannot forcibly discharge a guarantor¡¯s liability. Inclusion of such clauses requires necessity reviews, reasonable creditor grouping, and individual negotiations to balance plan feasibility with creditor rights protection.

Q: After the debtor discharged debt through property transfer, does guarantor Chen remain liable for the outstanding debt?

A: In this case, the debtor fulfilled part of its obligation to the securities company by transferring listed company stock to the bankruptcy administrator, clarifying that ¡°the specific amount of debt repayment shall be calculated according to the actual realisation price of the corresponding pledged shares¡±.

Article 92.3 of the Bankruptcy Law states that debtor exemption from residual liability post-liquidation does not affect the guarantor¡¯s liability scope.

Additionally, according to article 124 of the bankruptcy law, as well as article 23.3 of the Interpretation of the Supreme People¡¯s Court on the Application of the Security System of the Civil Code, the guarantor of the bankrupt shall, after termination of the procedure for bankruptcy, continue to bear the liabilities of payment of the claims that have not been paid according to the procedure for bankrupt liquidation.

Q: What recommendations arise from this case for formulating and reviewing reorganisation plans?

A: The authors believe that in bankruptcy reorganisation proceedings, attention should be paid to the following key aspects:

Necessity and legitimacy review. Bankruptcy administrators must rigorously assess the necessity of including guarantor discharge clauses and make in-depth and sufficient explanation.

Reasonable creditor grouping. Ensure proper grouping of secured creditors to protect their lawful rights.

Creditor vigilance. Creditors shall vote carefully and raise timely objections to the bankruptcy administrator and court. If the court considers that relevant provisions of the draft reorganisation plan are seriously illegal, it shall have the right not to approve them.

Gong Yi is a senior partner and Guo Luwen is an associate at Ronly & Tenwen Partners