Research On The Applicability Of The Center Of Main Interests Rule For Cross-border Insolvency In China Under The VIE Structure

The VIE structure connects domestic business operating entities and extraterritorial financing entities by means of agreement control,providing an alternative solution for Chinese domestic companies to obtain extraterritorial financing and for foreign investors to enter restricted areas in China,while its multi-entity,cross-border and complex agreement control features also make cross-border insolvency under the VIE structure different from the theory and practice of traditional insolvency,bringing two challenges to the current cross-border insolvency system in China: obtaining jurisdiction over extraterritorial entities and obtaining recognition and assistance from other countries.It brings two challenges to China’s existing cross-border insolvency system: obtaining jurisdiction over foreign entities and obtaining recognition and assistance from other countries,highlighting the problem of insufficient supply in China’s existing cross-border insolvency system.The "center of main interests" rule,created by the EU and promoted by the UNCITRAL Model Law on Cross-Border Insolvency,has become a widely recognized international cross-border insolvency rule and has been adopted and applied by many jurisdictions.The "center of main interests" rule plays the function of resolving jurisdictional conflicts and determining jurisdictional connection points in the Model Law on Cross-Border Insolvency and the EU cross-border insolvency rule system respectively.At the same time,in response to the phenomenon of shifting of COMI in practice,both systems have gradually improved the time standard and substantive factors for determining COMI.There is an urgent need to introduce the "center of main interests" rule in China.First of all,along with the rapid growth of the scale and number of VIE structure companies,the role of VIE structure for China’s enterprises to go out and come in has become more and more significant.Considering the instability of the VIE structure,the high risk of insolvency,and the value of insolvency scattered among various entities,the introduction of the "center of main interests" rule in China will be conducive to the acquisition of statutory insolvency jurisdiction recognized by other countries or regions.Secondly,among the major jurisdictions related to VIE structured companies in China,the United States has formally introduced the "center of main interests" rule,Hong Kong is considering to absorb the Model Law on Cross-Border Insolvency,and the Cayman Islands and British Virgin Islands follow the "center of main interests" rule in many issues of cross-border insolvency.The Cayman Islands and the British Virgin Islands follow the "centre of main interests" rule in many aspects of cross-border insolvency.With the introduction of the "center of main interests" rule in China,the possibility that insolvency proceedings commenced by our courts against entities outside of the VIE structure will be recognized and assisted by the relevant countries or regions is greatly enhanced.Introducing "center of main interests" rules should be one of the important goals of my country’s bankruptcy law reform,the Supreme People’s Court and the Hong Kong SAR Government have begun related pilot work in May 2021.At this stage,the "Enterprise Bankruptcy Law" has been added to the revision of the provisional rules,or enact judicial interpretation,or introduces the rules of the "center of main interests" rules to save legislative costs and reduce the instability caused by reform;At the same time,it should be adequately prepared to adopt the basic framework of "cross-border bankruptcy demonstration law",using the "cross-border bankruptcy demonstration law" to reserve autonomous space,steadily promote the reform of my country’s cross-border bankruptcy system;in addition,the overall situation is required.On the basis of pilot experience,construct a comprehensive inter-regional cross-border bankruptcy system,especially special arrangements in the Mainland and the Hong Kong SAR.