When an insolvent enterprise is able to pay off its due debts and has enough cash to maintain its daily operations, it will not enter into bankruptcy liquidation procedures. If the enterprise cannot turn losses into profits, it can apply for bankruptcy liquidation.
If the company is insolvent and its assets are insufficient to pay off its debts, it may apply to the people's court for bankruptcy declaration.
The debtor's application for bankruptcy shall meet the following conditions: (1) The debtor is unable to pay off due debts. The inability to pay off matured debts means that the repayment period of debts has expired and the creditor has put forward a demand for repayment, but the debtor is unable to pay off. The insolvency here should be a continuous state, not occasional one-time insolvency or temporary insolvency due to financial difficulties. According to the judicial interpretation of the Supreme People's Court, the debtor has stopped paying due debts and is in a continuous state. If there is no evidence to the contrary, it can be presumed that it cannot pay off due debts. (2) The assets are insufficient to pay off the due debts. The asset is insufficient to pay off the matured debt means that the debtor's asset value is less than the debt. (3) The debtor obviously lacks solvency. The debtor's apparent lack of solvency means that although the book value of the debtor's assets is sufficient to repay the debt, it is actually unable to repay and obviously lacks the possibility of repayment. If the debtor is unable to pay off its due debts and may lose its ability to pay, it may also apply for reorganization on its own.
[Legal Basis]
According to Article 7 of the Enterprise Bankruptcy Law of the People's Republic of China, the debtor may apply to the people's court for reorganization, reconciliation or bankruptcy liquidation under the circumstances specified in Article 2 of this Law.
If the debtor is unable to pay off its due debts, the creditor may apply to the people's court for reorganization or bankruptcy liquidation of the debtor.
If an enterprise as a legal person has been dissolved but has not been liquidated or has not completed liquidation, and its assets are insufficient to pay off its debts, the person who is legally responsible for liquidation shall apply to the people's court for bankruptcy liquidation.
