Partially Secured Creditor Status Under the 2014 Bankruptcy Law

According to the Bankruptcy Law 2014, creditors of bankrupt enterprises include unsecured creditors, partially secured creditors and secured creditors. Although it is not entirely clear, partially secured creditors may be considered a separate class of creditors and have separate rights in bankruptcy proceedings.

According to the Bankruptcy Law 2014:

· A secured creditor is a creditor who has the right to request the related bankrupt enterprise to fulfill its obligation to pay debt secured by the assets of the enterprise or of a third person; and

· A partially secured creditor is a creditor that has the right to request the related bankrupt enterprise to fulfill its obligation to pay the debt secured by the assets of the enterprise or a third person “where the value of the secured assets is lower than that debt”.

The above definition of secured creditor does not explicitly refer to “wholly secured creditor” because it does not require the value of the secured assets to be equal to or greater than the debt owed to the secured creditor. Accordingly, in terms of words, the term “secured creditor” can include both partially secured creditors and fully secured creditors. However, if we look more deeply at other provisions of the 2014 Bankruptcy Law, partially secured creditors can be classified into a separate group of creditors. However, it is unclear whether this distinction is intentional or just a coincidence due to the drafting technique of the 2014 Bankruptcy Law.

Specifically, the table below shows the difference between the rights of partially secured creditors and secured creditors:

Rights under the Bankruptcy Law 2014	Partially secured creditor	Secured creditor
Please provide documents and evidence	x	x
Receive notifications to exercise rights	x	x
Protect yourself or ask others to protect your legitimate rights and interests	x	x
Participate in asset management and liquidation at the request of judges, judgment enforcement agencies, administrators, and asset management and liquidation enterprises	x	x
Submit a request to open bankruptcy procedures; Amend and supplement the request to open bankruptcy procedures; Request to reconsider returning the request to open bankruptcy procedures.	x
Propose to the court the name of an administrator before opening bankruptcy proceedings	x
Request the court to apply, change or cancel temporary emergency measures	x
Negotiate with insolvent enterprises	x
Recommend reconsidering the decision to open or not open bankruptcy procedures	x	x
Request the court to temporarily suspend the performance of a contract that is likely to be detrimental to the insolvent enterprise	x	x
Recommend changing the Administrator if falling into the prescribed cases.	x	x
Request the Court to declare the transaction invalid, and request a review of the decision declaring the transaction invalid.	x	x
Compensate obligations for contracts established before the decision to open bankruptcy proceedings.	x	x
Send debt collection papers to the administrator	x	x
Recorded in the list of creditors	x	x
Request the administrator to add the creditor to the creditor list	x	x
Ask the judge to review the list of creditors	x	x
Participate in creditors’ meetings	x	x
Creditor participation is used as a basis to determine the eligibility conditions of the creditors’ meeting	x
Present opinions and discuss at creditors’ meetings	x	x
Vote at the creditors’ conference to approve decisions on (1) request to suspend resolution of requests to open bankruptcy procedures, (2) request to apply measures to restore business operations, or (3) request to declare bankruptcy	Not applicable	Not applicable
Establish a creditor representative board	Not applicable	Not applicable
Request the chief judge to review the resolution of the creditors’ conference	x	x
Request to reconsider the decision to suspend bankruptcy proceedings	x	x
Send comments on business recovery plans	x	x
Adopt the business recovery plan, including the adoption of further amendments	Not applicable	Not applicable
Supervise the business activities of the enterprise after approving the business recovery plan	x	x
Priority is given to payment with secured assets	x	x
Request to reconsider the decision to declare the enterprise bankrupt	x	x
Assets are divided after the decision to declare the enterprise bankrupt.	x