Hylands Promotes Recovery and Rebirth of Distressed Enterprises by Applying Mandatory Awards for the First Time to Protect the Legal Rights and Interests of All Creditors

CE Huatong Technology was established in 2010 with a registered capital of RMB 100 million, and is mainly engaged in real estate development projects. It possesses a large wireless IOT industrial park project located in Beijing Economic and Technological Development Zone, which is a high-tech key industrial real estate project. There were serious disputes among the original shareholders of CE Huatong Technology in the course of operation, and they contended for the control of the Company through multiple equity transfers and equity substitution, and they even pursued each other's responsibilities through criminal means, resulting in the long-term uncertainty of the equity of CE Huatong Technology and the inability to form effective resolutions for a prolonged period of time, and the Legal Representative was detained for a long time due to suspected criminal offences, resulting in the serious debt crisis of CE Huatong Technology and the complete suspension of the industrial park project in May 2014. 

On December 17, 2019, the Beijing No. 1 Intermediate Court decided to initiate pre-restructuring of CE Huatong Technology (hereinafter referred to as "the case") based on the application of creditors for restructuring, and on January 2, 2020, Hylands Law Firm (hereinafter referred to as "Hylands") was legally appointed as the provisional administrator of the case, with Jiehua RUI being the head of the provisional administrator. Upon acceptance of the appointment, the Firm actively proceeded with the work related to the interim administrator, made a comprehensive survey of the assets and liabilities of CE Huatong Technology, fully demonstrated the reorganization value of CE Huatong Technology, and actively introduced strategic investors to put in incremental capital. Meanwhile, based on detailed investigation and research, the Firm has performed a detailed identification of the actual right holders, registered right holders and exercise paths of the contributor interests of CE Huatong Technology. 

On July 13, 2020, under the premise that the pre-restructuring plan of the case was widely approved by creditors, the Firm filed the Pre-Restructuring Work Report to the Beijing No. 1 Intermediate Court in accordance with the law to request the Beijing No. 1 Intermediate Court to rule on the acceptance of the application for restructuring of CE Huatong Technology. 

On August 3, 2020, Beijing No. 1 Intermediate Court ruled to accept the application for restructuring of CE Huatong Technology (hereinafter collectively referred to as "the case" along with the aforementioned pre-restructuring stage), and appointed the Firm as the administrator of the case in accordance with the law. Upon the asset investigation and claim filing organized by the Firm, the total liabilities of CE Huatong Technology amounted to approximately RMB 1.3 billion, while the value of assets in the state of rapid realization was only over RMB 300 million, and the total assets available for general creditors to settle after the priority settlement of bankruptcy expenses, common interest debts and priority claims was RMB 0, with 0% settlement rate of general claims. Furthermore, related parties of CE Huatong Technology's contributor group showed relatively strong resistance to the reorganization process from the beginning to the end, and raised objections through various means. As the administrator, the Firm, based on the principle of openness of procedures as well as full protection of the right to information of all parties involved in the reorganization, has disclosed the important progress of the reorganization process to related parties in a timely manner, attached great importance to every objection raised by the parties and responded to them in writing immediately. 

Based on the premise of full consideration of the causes of the bankruptcy of CE Huatong Technology, the material negligence of the contributors and the actual values of the owners' equity of the enterprise, the Firm determined the reorganization idea of acquiring strategic resources through full adjustment of the contributors' equity and introducing strategic investors to invest incremental funds, so as to maximize the protection of the legitimate rights and interests of creditors. Upon active communication, negotiation and consultation with the strategic investors in this case and after acquiring extensive approval from the creditors, the Firm has formulated a draft reorganization plan for this case. Based on the provisions of the draft reorganization plan, the priority claim settlement rate in this case has increased from 72.47% to 100%; employee claims and tax claims have been fully settled; the general claim settlement rate has increased from 0 to over 25%, and the settlement rate of some small and medium creditors has exceeded 50%, thereby effectively safeguarding the legitimate rights and interests of all creditors. Eventually, for the reorganization plan of this case, the amount of claims that the group with property secured claims agreed to the reorganization plan accounted for 100% of the group, while 100% of the employee claims and tax claims were fully settled without participating in the vote on the draft reorganization plan, and the amount of claims that the group with general claims agreed to the draft reorganization plan accounted for 96.25% of the group. However, there were significant disagreements among the group of contributors, all of them voted not to agree to the reorganization plan. Subsequently, the Firm believed that the reorganization plan in this case was in compliance with Article 87 of the Bankruptcy Law of the People's Republic of China (hereinafter referred to as "Bankruptcy Law"), and upon full demonstration of the feasibility of the reorganization plan, filed an application for approval of the draft reorganization plan with the Beijing No. 1 Intermediate Court in accordance with the law.