Insolvency 2023 Comparisons

The number of new bankruptcy filings during the first ten months of 2023 decreased compared to 2022. However, the number of businesses declared bankrupt increased, having reached a peak during May 2023.

The insolvency regime in Macau follows the conventional differentiation between bankruptcy and insolvency. Entrepreneurs engaged in commercial activities, such as commercial companies, individuals or entities acting on their own behalf or through third parties, are considered bankrupt if they fail to pay their debts promptly. Debtors who are not commercial entrepreneurs, such as freelance professionals, may be deemed insolvent if their liabilities exceed their assets.

The provisions of the bankruptcy regime apply to the insolvency regime, unless they do not relate to the commercial enterprise, without prejudice to specific provisions on insolvency and other regulations. Macau bankruptcy rules are dependent on the principle of territoriality.

Within the Macau jurisdiction, the most relevant laws and statutory regimes governing financial restructurings, reorganisations, liquidations and insolvencies of business entities are the following:

• Macau Commercial Code, approved by the Decree-Law 40/99/M, of 3 August 1999;
• Macau Civil Code, approved by the Decree-Law 39/99/M, of 3 August 1999; and
• Macau Civil Procedure Code, approved by the Decree-Law 55/99/M, of 8 October 1999.

Insolvency proceedings may be voluntary, if initiated by the debtor, or involuntary, if commenced through the intervention of creditors or the Public Prosecutor’s Department, regardless of the debtor’s initiative.

The debtor has the duty to present themself to the court within 15 days of failing to pay one or more debts that, considering the amount due and the circumstances in which default took place, evidence their incapacity to pay their debts as they fall due.

Under Macau law, creditors and the Public Prosecutor’s Department, which represents the interests it is legally obliged to protect, have the right to legitimately apply to the court for the declaration of a merchant’s bankruptcy.

The applicant must present a plea to the court, detailing the following:

• the grounds for the application;
• the source, type and value of their credits;
• an evaluation of whether filing for bankruptcy would be suitable before hearing from the debtor; and
• all pertinent evidence and any extra proof needed to bolster their plea.

The insolvency system in Macau differentiates between bankruptcy and insolvency. Merchants, including commercial companies, individuals or entities acting on their own behalf or via third parties, are deemed bankrupt if they fail to promptly settle their debts. In contrast, debtors who are not merchants, such as freelance professionals, may face insolvency if their liabilities exceed their assets.

Therefore, in accordance with Macau law, the requirement for being in the state of bankruptcy is the incapacity to pay debts as they fall due.

Given the importance of the financial sector and the need to protect depositors, takers and beneficiaries, who are typically consumers, these are subject to specific statutory bankruptcy regimes.

In relation to the Macau financial entities, please note that bankruptcy laws may apply, but before that there is an administrative process of intervention which may be applied, under the Macau Financial System Act.

Whenever the situation of the financial entity has reached a critical point that it may jeopardise the fulfilment of its obligations to depositors or other creditors, or if it puts at risk the confidence in the financial system, then the Chief Executive of Macau may, on advice from Autoridade Monetária de Macau (AMCM, the Monetary Authority of Macau), order immediate intervention in the management of the institution in question, namely by appointing one or more delegates or an administrative committee for this purpose.

Under this intervention regime, the Chief Executive may impose investigations and other exams required to assess the activity and the reasons for reaching such critical situation, may also restrict the activity of the commercial bank or order acts adequate to remedy the situation, as well as, among other measures, submit a request to the Public Prosecutor to petition for bankruptcy in the courts.

In addition to the measures mentioned, the intervention may be accompanied by the following:

• temporary waiver from fulfilling timely obligations previously undertaken by the institution – this shall not in any way affect the rights of the creditors or the guarantors;
• temporary closure of service counters of the institution; and
• an order that certain operations or activities be carried out only upon prior approval from AMCM.

The intervention suspends the enforcement of all debts against the credit institution and of the statutes of limitation or forfeiture opposed by the credit institution.

Under Macau law, there is no alternative to bankruptcy proceedings. However, under this process and in the early stage of the insolvency, it is possible to have an agreement between the creditors or for the bankrupt party to request that the court reduce the credit (concordata), which, if accepted by the court, will be proposed to the creditors, who may vote on such a request.

Creditors can also enter into a creditor’s agreement, in which they agree to incorporate a private company formed with the assets of the debtor in which each creditor will have a share proportional to his credits against the debtor.

Corcordata

A concordata is a proposal that a debtor or one or more creditors can offer to other creditors to avoid the debtor being declared bankrupt. This proposal includes a condition that the debtor will pay off a certain amount of their debts within a specific timeframe. A concordata can also serve as a short-term suspension of regular loans.

The debtor must make the request no later than five days before the first creditors’ meeting, where the credits will be verified. At the end of the meeting, any person to whom money is owed can suggest a concordata. To pass the concordata, most creditors must vote for it, with their votes representing at least 75% of the confirmed debts.

Creditors’ Agreement

As mentioned in 3.1 Consensual and Other Out-of-Court Workouts and Restructurings, if a concordata is not reached, the creditors may agree to set up a private company with the debtor’s assets, in which each creditor will have a share in proportion to that creditor’s claims on the debtor.

This agreement is only possible if 75% of the creditors vote in favour. The clauses of the future deed of incorporation must be submitted to the court within the time limit set by the judge. However, it may be contested within ten days of the deadline by either:

• the debtor (if he has not given his consent);
• the creditors, who have not been included in such an agreement;
• the public prosecutor; or
• if the debtor is a company, the creditors of the shareholders with unlimited liability.

Pending the court’s decision on whether to approve the agreement, new admissions to the agreement are possible and the accepting creditors may propose an increase in the percentage offered to the non-accepting creditors.

If the agreement is approved by the court, the bankruptcy proceedings are terminated and the administrator’s functions cease. If there is neither a concordata nor a creditors’ agreement, or if they are rejected by the court, the debtor is immediately declared bankrupt.

Not applicable in this jurisdiction.

Creditors are subject to the general principle of good faith throughout the entire bankruptcy procedure (including, but not limited to, the initial phase).

As mentioned in 3.2 Consensual Restructuring and Workout Processes, a concordata can be reached when 75% of the creditors vote in favour. Creditors who do not accept the settlement may, either individually or jointly, contest within ten days after acceptance of the concordata. With the court’s approval, the concordata is compulsory for all unsecured creditors, regardless of whether they accept the settlement, as long as these debts existed before the submission of concordata to the court.

In the Macau SAR, secured creditors usually take the following liens/securities.

Mortgages and Pledges

Creditors can secure real estate and movable property that require registration (cars, boats, aeroplanes) by means of mortgages created by public deeds, which are subject to public registration.

Items of movable property such as intellectual property, shares, bank accounts and financial instruments, which do not need public registration, are commonly secured through the creation of pledges.

Mortgages and pledges bestow upon creditors the right to be paid before ordinary creditors up to the amount of the secured asset.

Lien

Retention of title is primarily a practice used by trade creditors and suppliers to retain title to goods supplied until the debt has been paid in full. This practice is also commonly employed to secure vehicles, as it can be registered.

Financial Collateral

Financial instruments and funds held in bank accounts may be offered by a borrower to a lender through a financial collateral agreement that benefits from preferential treatment in the event of the debtor’s bankruptcy.

Secured creditors have the following rights and remedies.

• Priority of secured creditors– Secured creditors have priority over unsecured creditors in the distribution of assets during enforcement and insolvency proceedings. They are entitled to be paid from the proceeds of the sale of the secured assets before any distribution is made to unsecured creditors.
• Right to enforce security– Secured creditors have the right to enforce their security interests outside the insolvency proceedings. They may take possession of the secured assets or sell them to recover their debts, subject to any applicable legal requirements.
• Right to participate in bankruptcy proceedings– Secured creditors have the right to participate in insolvency proceedings and have their claims recognised. They may submit their claims to the liquidator or the court and have them taken into account in the distribution of assets.
• Voting rights – Secured creditors may have the right to vote on certain matters in insolvency proceedings. The extent of their voting rights may depend on the specific circumstances and the type of insolvency proceeding.
• Right to challenge measures– Secured creditors have the right to challenge certain actions taken by the debtor or the insolvency administrator if they consider that the measures adversely affect their rights or interests. They may seek relief or protection from the court to ensure that their rights are respected.

Not applicable in this jurisdiction.

In Macau, the rights and priorities of secured and unsecured creditors are governed by the Macau Civil Code and the Macau Commercial Code, with the following effect.

It is important to note that the specific rights and priorities of creditors may vary depending on the circumstances and the terms of the individual agreements between the debtor and the creditors.

Secured Creditors

Mortgage creditors

Mortgage creditors have a higher priority compared to other secured and unsecured creditors. They are entitled to be paid from the proceeds of the sale of the mortgaged property before other creditors.

Pledge creditors

Pledge creditors have a right to be paid from the proceeds of the sale of the pledged property before unsecured creditors. However, they have a lower priority than mortgage creditors.

Lien creditors

The holder of a lien on real property has a right to be paid in priority to the debtor’s other creditors, before the mortgage, until he delivers the retained property.

Unsecured Creditors

General unsecured creditors

General unsecured creditors do not have no specific security interest in the debtor’s assets. They have a lower priority compared to secured creditors and are paid after the secured creditors have been satisfied.

Priority unsecured creditors

Certain creditors, such as employees, have preferred status and are given priority over general unsecured creditors. They are entitled to be paid out of the debtor’s assets before general unsecured creditors.

Subordinated creditors

Subordinated creditors have a lower priority compared to general unsecured creditors. They are paid only after the claims of the general unsecured creditors have been satisfied.

No response is available for this jurisdiction.

In Macau, unsecured creditors have the following rights and remedies.

• Right to participate in bankruptcy proceedings – Unsecured creditors have the right to participate in insolvency proceedings and to present their claims to the bankruptcy administrator or liquidator. They may provide evidence of their claims and seek to have their claims recognised and included in the distribution of assets.
• Right to challenge transactions – Unsecured creditors may have the right to challenge certain transactions that took place prior to the insolvency proceedings. These transactions may include preferential payments to certain creditors or transactions deemed to be fraudulent or prejudicial to the interests of creditors. If successful, the challenged transactions may be set aside, and the assets involved may be included in the distribution to creditors.
• Right to vote on the bankruptcy plan – In a formal voluntary or involuntary proceeding, unsecured creditors may have the right to vote on the proposed insolvency plan. The plan sets out how the debtor’s assets will be distributed among creditors. Unsecured creditors can exercise their voting rights to accept or reject the plan, depending on their assessment of its fairness and feasibility.
• Right to object to the plan – Unsecured creditors also have the right to object to the proposed bankruptcy plan if they believe it treats their claims unfairly or if they have other valid objections. They may submit their objections to the court or the liquidator, who will take them into account in the decision-making process.

Once the bankruptcy proceedings have been filed, the court appoints the bankruptcy administrator, who may take the necessary measures to ensure that interests of the creditors are not jeopardised, and who supervises the debtor in the management of its business and its own assets.

In addition, if bankruptcy proceedings are brought by creditors on the basis of one of the circumstances referred to in Article 1082, for example, dissipation of assets, it is possible for the creditors, prior to filing for bankruptcy, to apply to the court for provisional measures preventing the debtor from carrying out any transaction involving its assets, provided that evidence is provided of the debt and that there is a risk of dissipation of the debtor’s assets.

In Macau insolvency proceedings, there are certain preferential claims that take precedence over other claims. These priority claims include the following

Government claims

Priority will be given to claims by the Macau government for indirect or direct taxes due. These claims are considered to be of public interest and are given priority to ensure the government’s ability to collect taxes.

Administrative expenses

Priority is given to expenses incurred in the administration of the bankruptcy proceedings, such as the fees and expenses of the bankruptcy administrator or liquidator. These expenses are necessary for the proper administration of the proceedings and are paid before other claims.

Employee and pension claims

Claims of employees for unpaid wages, salaries and other employment-related benefits and claims of pension funds for unpaid contributions are given priority. These claims are considered to be of high importance for the protection of the rights and interests of employees and pensioners.

Official fees

Priority is given to fees and expenses incurred by the bankruptcy administrator or liquidator for their services in the administration of the insolvency proceedings. These fees are usually paid before other claims in order to ensure the proper administration of the proceedings.

At least ten days prior to the meeting for creditors, the debtor can suggest a “concordata”. This involves reducing or changing some or all of the owed debts, which can be just a temporary suspension. Creditors are also able to propose modifications to the presented bases or the concordata, whether or not initiated by the debtor.

To be accepted, the agreement must be approved by most of the voters holding credits, amounting to at least 75% of the credits. The court will have to endorse this agreement according to Article 1061 of the Macau Civil Procedure Code.

If there is no concordata, creditors can enter into an agreement, in which they create a limited liability company that will carry on the debtor’s business activity. Here are the terms.

• Creditors who sign the agreement and other individuals can join the company.
• Creditors’ shares correspond to their credits and may be represented partially or entirely, while remaining liabilities for those who do not sign the agreement will be deducted.
• The company will hold onto the assets of the commercial entrepreneur for the amount that goes beyond the payment of the preferred credits. However, if any of the creditors involved in the agreement wish to retain assets that are under any real right of guarantee, they must pay the respective credit or guarantee the full payment at the due date.
• The company must also pay non-accepting creditors from the agreement within three years. The percentage agreed upon will be applicable as per the provisions of Article 1061, paragraph 2.

In cases when these bankruptcy preventative measures cannot be reached, the court will declare the bankruptcy.

During this initial stage of the bankruptcy proceeding, debtors will be involved in the management of their assets and that of the company, being only supervised by the Bankruptcy Administrator and the designated creditors. However, debtors are prohibited from taking any action that may reduce their assets or alter the situation of the creditors.

As mentioned in 6.1 Statutory Process for a Financial Restructuring/Reorganisation, the creditors are actively involved in all preventative measures, by participating in the negotiations on the concordata with the debtor or by submitting concordata or creditors’ agreement to the court.

The claims of dissenting creditors can be modified without their consent when the court approves a concordata, which has been submitted to the court after being approved by creditors holding at least 75% of the credits.

There is no specific regulation for trading of claims against a company in statutory restructuring proceedings. However, creditors could trade their credits through the general rule of assignment of contract status.

Not applicable in this jurisdiction.

During the initial stage of bankruptcy proceedings, debtors are prohibited from taking any action that may reduce their assets or alter the situation of the creditors as they are at the moment of the bankruptcy filing.

According to Macau law, if the purchaser in a purchase and sale agreement declares bankruptcy before the contract is fully performed by both parties, the seller has the option to complete their part of the agreement upon receipt of payment from the bankruptcy estate. If the seller chooses not to exercise the said option, the contract will remain suspended until the bankruptcy administrator, with the authorisation of the Public Prosecutor’s Office, declares their intention to either perform the contract while maintaining all of the buyer’s obligations or terminate the contract, releasing the bankrupt estate from these obligations. However, the seller may set a reasonable time limit for the bankruptcy administrator to exercise their option. If the bankruptcy administrator fails to do so within the given time frame, the contract will be considered terminated.

On the other hand, if the seller is declared bankrupt after ownership of the item has been transferred, the purchase and sale contract remains valid. However, if ownership has not been transferred, the bankruptcy administrator, with the authorisation of the Public Prosecutor’s Office, can choose to fulfil or terminate the contract. In the latter case, the buyer has the right to claim compensation from the bankrupt estate for any damages suffered.

In addition, the bankruptcy administrator, with the authorisation of the Public Prosecutor’s Office, may choose to fulfil or terminate the contract in the following cases:

• if the bankrupt purchases certain goods at a market or stock exchange price on a specific date or within a particular period that ends after the declaration of bankruptcy;
• if goods are sold to the bankrupt in instalments, with the lessor retaining ownership; or
• if there is a lease of a specific item with a clause stating that the item will become the property of the lessee after all agreed rents have been paid.

If the bankruptcy administrator terminates the contract, the other party can demand compensation for any damages suffered. This demand must be made within two days of the declaration of bankruptcy. The compensation should be equal to half of the average purchase price on the market or stock exchange. The bankrupt estate will consider the demand for compensation as a joint claim.

If the seller has dispatched movable items to the buyer before the buyer declares bankruptcy, but the items have not yet been received and no one else has acquired rights over them, the seller may repossess them. The seller is responsible for the costs of returning the items and refunding any advances received.

If the seller chooses not to repossess the items, they can request payment of the price from the bankrupt estate as a joint creditor.

The bankruptcy administrator, with approval from the Public Prosecutor’s Office, may object to using the above-mentioned option and pay the full price upon receiving the dispatched goods.

Not applicable in this jurisdiction.

Not applicable in this jurisdiction.

The value of each claim is determined in the list of creditors prepared by the Bankruptcy Administrator, which may be challenged by the creditors.

The concordata may reduce or modify the debtor’s debts, in whole or in part. This modification may be limited to a simple moratorium.

The Macau law does not explicitly allow for non-debtor parties (such as guarantors) to be released from liabilities.

In Macau, a creditor may exercise the right of set-off, offset or netting if the following conditions are met.

• Reciprocal debts– There must be a mutual and reciprocal debt relationship between the creditor and the debtor. This means that the creditor must have a claim against the debtor that is of the same nature as the creditor’s claim against the debtor.
• Pre-existing debts– The debts subject to set-off, deduction or netting must have existed prior to the opening of the insolvency proceedings. As a general rule, debts arising after the opening of the proceedings cannot be set off.
• Notice requirement– The creditor must give notice to the insolvency administrator or liquidator of its intention to exercise the right of set-off, offset or netting. This notice should include details of the claims and the basis for the set-off.

Generally, the right of set-off may be exercised during the insolvency proceedings, provided that the creditor has given the required notice to the insolvency administrator or liquidator.

It is important to note that the right of set-off, offset or netting may be temporarily suspended or terminated in certain situations. For example, set-off rights may be suspended or terminated if the debtor has obtained a court order for a moratorium or has committed fraudulent acts to avoid payment. In addition, if the set-off would result in unfair treatment of other creditors or is contrary to public policy, the court may limit or deny the set-off.

If the debtor fails to meet any of the obligations outlined in the concordata, creditors with claims pre-dating the concordata’s approval may request the debtor’s bankruptcy declaration. If the debtor goes bankrupt before fully complying with the concordata, creditors can only contest the bankruptcy for the amount they have not yet received of the agreed percentage. However, the guarantees for the payment of this percentage remain in place.

The concordata does not, in general, change the company’s ownership structure, and existing equity owners usually retain their interest in the company. In a situation of financial distress, equity owners should be the first to bear the losses of the company. Therefore, it is uncommon for them to receive any dividends or payments from the company while the concordata is in force.

However, if there is no proposal for a concordata with creditors or if it is not accepted at the creditors’ meeting, the creditors may decide to establish a private limited company to continue the commercial entrepreneur’s business. The following terms apply.

• The agreement signatories will be included in the company’s constitution, and other individuals may also be included.
• The shares of the creditors are represented by their claims, minus any remaining liabilities to those who do not sign the agreement.
• The company retains the assets of the commercial entrepreneur that exceed the payment of the preferred claims. However, if the creditors who have participated in the agreement wish to keep assets that are subject to a security interest, they must pay the corresponding claim or guarantee full payment upon maturity.
• The company must pay the non-accepting common creditors the agreed percentage within three years.

Initiating Proceedings

Bankruptcy proceedings usually commence by the filing of an application in court presented by the debtor, the creditors or the Public Prosecutor, together with the documents evidencing the bankruptcy situation.

The application filed by a creditor must include information regarding the origin, nature and amount of the credit, the convenience, if applicable, of having the bankruptcy declaration without hearing the debtor, as well as names and addresses of all shareholders with unlimited liability, where the debtor is a company.

If the applicant is the debtor, then it is important to do the following:

• set out the causes of the state of the bankruptcy, offering evidence, submitting a list of documents included in Article 1048 of the Civil Procedure Code, such as a detailed list of all creditors, including their locations, claims, due dates and any distinctive guarantees they have received;
• list and identify all ongoing legal actions and executions against the applicant;
• provide a detailed list of assets and their corresponding values if the applicant does not have organised accounts; and
• provide a copy of the resolution approving the bankruptcy application, if the debtor is a legal person.

Creditors’ Claims

Creditors who have not been indicated by the debtor during the bankruptcy application may submit a claim listing the details of their debts, including where and why they arose. This must be completed no later than 15 days before the scheduled first creditors’ meeting.

Recognition of Credits

The Bankruptcy Administrator, with the assistance of the designated creditors, should present to the creditors’ meeting the list of creditors, duly organised in the following order:

• creditors listed by the debtor whose credits are undisputed;
• creditors whose credits have been challenged by the debtor in terms of their type or amount;
• creditors listed by the debtor but whose credits were challenged in terms of their type and amount;
• creditors listed by the debtor but whose claims were fully disputed; and
• creditors who were not listed by the debtor but filed a claim.

The Bankruptcy Administrator will present a list of creditors for discussion and voting at the creditors’ meeting. Uncontested credits will be considered recognised, and those with favourable votes from the majority of present creditors representing the majority of the credit’s value. The value indicated by the administrator will be considered if they challenge the amount of any credit.

Attachment on Judicial Proceedings

All pending judicial proceedings in which the interests of the bankrupt’s estate are at stake are attached to the bankruptcy proceedings, with the exception of proceedings in which the bankrupt is the plaintiff, proceedings concerning the status and capacity of persons, and proceedings in which other defendants are named in addition to the bankrupt.

Effects on the Management Powers

Initially, debtors retain power to administer the assets and to manage their company, with the assistance and supervision of the bankruptcy administrator and the creditors designated to assist, being however prohibited from carrying out acts that reduce the assets or change the situation of creditors.

Upon the declaration of bankruptcy, the debtor/bankrupt is not allowed to handle or sell their current and future possessions, which are then a part of the bankrupt estate. The bankruptcy administrator takes over the bankrupt’s representation in all monetary matters that concern them.

Effects on Contracts

The declaration of bankruptcy entails:

• closing the bankrupt’s current accounts;
• the immediate maturity of all debts;
• the discontinuation of interest or other charges on the bankrupt’s obligations; and
• the cessation of discounting on obligations subject to discounting.

Distributions to Creditors

Creditors are paid with the proceeds of the sale of the assets belonging to the bankruptcy estate. These proceeds are used, at first instance, to pay the insolvency estate debts (notably liquidation expenses) and only the remaining part pays the credits in accordance with the amounts and ranking determined in the list of recognised creditors and decided by the court. Invariably, the proceeds are not sufficient to fully pay the recognised credits; thus, creditors are paid pro rata within each class.

Interim payments are available once there is a final decision on the credits’ ranking and value and are currently mandatory in certain circumstances.

The sale of assets belonging to the bankrupt estate is carried out by the bankruptcy administrator under the supervision of the Public Prosecutor. Once the bankruptcy declaration is final, there will be a sale of all assets listed for the bankruptcy estate, which should be completed within six months (the judge may extend it for a period not exceeding six months, at the request of the Bankruptcy Administrator and upon hearing the Public Prosecutor).

Secured creditors who acquire assets from the bankruptcy estate are exempt from depositing any portion of the price that is unnecessary to pay off creditors ranked ahead of them, provided that the amount does not exceed what they are entitled to receive.

Creditors are organised as designated creditors and at creditors’ meeting.

Designated Creditors

Once the bankruptcy proceedings begin, and prior to the first creditors’ meeting, the court designates one or more creditors from the debtor’s list of known creditors to help the bankruptcy administrator in carrying out duties that fall within the scope of the bankruptcy administrator’s competency.

Creditors’ Meeting

Creditors’ meetings are general assemblies of creditors composed by all the creditors where preventative measures will be discussed in order to prevent the bankruptcy by an agreement either to abdicate part of the credits or to postpone the due date of the credits or both.

At the initial creditors’ meeting, the bankruptcy administrator and designated creditors present a report assessing related or claimed credits, the accuracy of the balance sheet, the business situation, the possibility of continuing the company and the causes behind the bankruptcy status. Additionally, a list of duly classified creditors is provided.

Creditors have the right to attend the meeting, which is presided over and convened by the judge, with the attendance of the Public Prosecutor. Only creditors whose claims have not been fully contested by the bankruptcy administrator are eligible to vote. However, they are prohibited from voting on their own claim.

Macau bankruptcy rules are dependent on the principle of territoriality, ie, foreign bankruptcy/insolvency proceedings will not have effect in Macau unless the foreign insolvency is recognised according to the relevant rules set out in the Macau Civil Procedure Code.

Macau courts may recognise the foreign insolvency proceedings if certain conditions are met.

• Reciprocity– The foreign country must have a reciprocal arrangement with Macau for the recognition of insolvency proceedings. This means that Macau will only recognise and provide assistance to foreign proceedings if the foreign country also recognises and provides assistance to Macau insolvency proceedings.
• Jurisdiction– The foreign insolvency proceedings must have been commenced in a country where the debtor has its centre of main interests, which generally is the place where the debtor conducts its main business activities or where its principal assets are located. Please note that if the company has its registered office located in Macau, the Macau courts consider themselves as having exclusive jurisdiction to decide upon bankruptcies and insolvency proceedings.
• Public policy– The recognition and assistance must not be contrary to Macau’s public policy. Macau courts may refuse to recognise or provide assistance if the foreign proceedings are deemed to be inconsistent with Macau’s fundamental principles of justice or public order.

As per the information available, no protocols or other arrangements have been entered into with foreign courts to co-ordinate proceedings.

As per the information available, there are no rules, standards or guidelines applicable in Macau for determining the preference of jurisdiction’s decisions, rulings or laws.

Creditors in Macau will be paid first in relation to a debtor’s assets (representation) in Macau. This is guaranteed by provisions in both banking law and commercial code.

Foreign insolvency judgements are only enforceable in Macau if a special proceeding of Recognition and Revision of Foreign Judgments takes place. It should be noted, however, that the Macau courts have exclusive jurisdiction over bankruptcy and insolvency proceedings involving companies incorporated in Macau. Otherwise, judgments will be revised and confirmed by the Macau Intermediate Court provided that:

• the judgment is intelligible, final and conclusive;
• there was no fraud in the course of the relevant proceedings, and it is not a matter of the exclusive competence of the courts of Macau, such as proceedings relating to real estate rights of properties located in Macau and matters of insolvency and bankruptcy;
• the matter of the judgment is not the subject of a case pending in the court of Macau or a case that is res judicata according to the laws of Macau, except in cases where the action commenced in the foreign court or arbitral tribunal before action was instituted in the court of Macau;
• the defendant was regularly summoned to the proceedings of the foreign court or tribunal and the adversary system and principle of equal standing of the parties were observed in the proceedings; and
• the enforcement of the judgment would not result in a clear violation of public policy in Macau.

Under Macau law, the statutory officer appointed in bankruptcy proceedings is designated as the “bankruptcy administrator” and the administrator’s rights and duties are governed by the Macau Civil Procedure Code.

The bankruptcy administrator’s duties include the following.

• Initially, these duties are to assist and supervise the debtor’s actions in the management of the company and the administration of its assets, issuing circulars to the creditors informing them of the meeting of creditors, drafting the report to be submitted to the meeting of creditors and proposing to the court the measures deemed appropriate to safeguard the interests of the creditors in the event of a risk of loss or dissipation of the assets.
• Once the bankruptcy has been declared, the bankruptcy administrator may carry out all ordinary administrative acts in respect of the bankrupt’s assets; the exercise of any special powers is subject to the express authorisation of the public prosecutor.
• In the interests of both the bankrupt and the creditors, the bankruptcy administrator should execute whatever is suitable for safeguarding and enabling the bankrupt’s rights. Additionally, the bankruptcy administrator must probe into the bankrupt’s estate, the circumstances under which business was conducted, and the triggers for the insolvency, to forestall further impoverishment of the bankrupt’s financial circumstances.

Appointment

The bankruptcy administrator is appointed by the court from among persons recognised as suitable for the role and may be appointed on the proposal of the petitioner in bankruptcy.

Interaction With the Debtor’s Management

The bankruptcy administrator, at an early stage of the bankruptcy proceedings, helps and supervises the debtor both in running the business as well as managing the debtor’s other assets. Bankruptcy administrators can propose to the court any measures they think fit to prevent any act that might turn out to be detrimental to creditors’ interests, mainly to prevent asset stripping.

Under Macau law, directors are responsible for running the company and acting in its best interests. They must be careful and act like good managers.

Directors must also apply for bankruptcy if needed. Directors can be held responsible to creditors if the company does not have enough money to pay them, and the directors acted contrary to the law or articles of association designed to protect creditors.

Directors can be held responsible for any harm caused to the company due to their breach of duties outlined by the law or the company’s articles of association. They can escape liability only if they demonstrate that they acted responsibly. Directors can be held directly liable to the shareholders for the harm caused by their actions during the course of their work.

In some cases of gross negligence, wilful conduct or fraud, criminal charges may apply.

Directors have a legal responsibility to compensate the company for any loss caused by their breach of duty imposed by law or the articles of association. They can avoid liability only if they can prove that they acted without fault.

Directors are also liable to the company’s creditors if, in breach of a provision of the law or of the articles of association aimed at their protection, the company’s assets become insufficient to meet the creditors’ claims.

Therefore, if the directors have acted to the detriment of the company’s assets or creditors, the company may bring an action against the administration of the company within three months of the resolution. This action is subject to the shareholders’ resolution adopted by a simple majority, which will result in the dismissal of the directors concerned.

If the company or its shareholders have not already done so, the company’s creditors may exercise the right to indemnification to which the company is entitled. This is provided that there is a serious risk of a significant reduction in the patrimonial guarantee.

After the declaration of bankruptcy, claims alleging breach of duties owed by directors to creditors are exclusively brought by the bankruptcy administrator.

Transactions concluded before the bankruptcy declaration order may be annulled and/or terminated and the assets returned to the bankruptcy estate, provided that the counterparty acted in bad faith. The following are examples:

• non-onerous or gratuitous transactions (ie, transactions intended to provide a pecuniary or other benefit to one of the parties) entered into up to two years before the declaration of bankruptcy, which have resulted in asset dissipation;
• asset distribution made in the year before the declaration of bankruptcy, in which the part allocated to the bankruptcy was constituted by assets easily dissimulated, and to the remaining interested parties the allocation was made with real estate properties or registered assets; and
• onerous transactions (ie, transactions intended to provide an advantage to both parties) executed in the six months before the declaration of bankruptcy with:
1. an entity controlled (direct or indirectly) by the bankrupt;
2. an entity who controls (direct or indirectly) the share capital of the bankrupt; or
3. an entity’s administrators or directors.

Furthermore, the following acts or transactions are legally presumed as concluded in bad faith for the purpose of action of defence for fraud against a counterparty:

• payments or set-off agreements involving unusually large amounts made up to one year before the declaration of the bankruptcy, for settlement of either outstanding or not outstanding debts;
• collateral security given after the constitution of the liability secured, within one year before the declaration of the bankruptcy;
• collateral security executed simultaneously with the constitution of the liability secured, within 90 days before the declaration of the bankruptcy;
• onerous transactions entered into up to two years before the declaration of the bankruptcy, in which the obligations and liabilities assumed by the bankrupt are unreasonably higher than the obligations assumed by the counterparty; and
• execution of guaranties or letters of credit regarding transactions without real advantages to the bankrupt, made up to two years before the declaration of the bankruptcy.

The period in which transactions can be challenged or reversed is as follows: (i) six months for any detrimental actions taken by the bankrupt in conjunction with a company or civil partnership they control (either directly or indirectly), or, if the bankrupt is a legal entity, with a company or civil partnership that controls the bankrupt’s capital or is controlled by the bankrupt, or with the administrators, managers or directors of these entities; and (ii) two years for all remaining transactions.

Claims to set aside or annul transactions can be brought by either bankruptcy administrator (subject to authorisation given by the Public Prosecutor) or the bankrupt’s creditors.