Insolvency 2020

Last Updated November 19, 2020


Law and Practice


Riquito Advogados provides legal services to a diverse range of clients in various industries, but has a particular focus on corporate clients. The firm has five qualified lawyers in offices in Macau SAR and Lisbon, Portugal, and its key practice areas are corporate/M&A, contracts/contractual investment, restructuring, litigation and arbitration, IP, foreign investment, corporate finance, real estate, aviation, private equity, project finance, labour and taxation.

There is no statistical data on the state of the restructuring market in Macau SAR (Macau). Empirical data regarding restructuring is limited and does not provide information on the volume and velocity of financial restructuring proceedings. As such, it is also not possible to gauge the specific impact of COVID-19, although, based on the evidence and the news reported by the media, there is an increased number of pandemic-related restructurings, as companies struggle with cash flow due to the significant decrease in revenues.

Regarding insolvencies (applicable to non-merchants) and bankruptcies (applicable to merchants, both individuals and companies), empirical data shows that on average there are five insolvencies per year, and an average of one to two bankruptcy procedures every four or five years. Insolvency/bankruptcy proceedings usually take between three and 12 months to be completed, without considering the liquidation stage of such proceedings, and this timeline is extended to around 18 months in the case of an appeal to the Court of Second Instance. The assets liquidation stage varies depending on the number and types of assets and the rights of the insolvent/bankrupt’s estate, the number of creditors and the amount of credit.

Industry Sector-Specific Restructuring Trends

There are no relevant trends influencing the incidence of financial restructurings and insolvencies in Macau.

General and sector factors that influence financial restructurings in Macau are as follows:

  • Due to the legislative approval of Law No 10/2013, gazetted on 2 September (“Land Law”), which eliminates the ability of the government to renew provisory land concessions, real estate developers holding land development rights have been forced to either proceed with (out-of-court) financial restructurings to obtain additional funds to develop their land plots before the expiry of the provisory concession or, being unable to develop the plot before expiry of the provisory concession or having the concession terminated by the government due to non-development of the plot, have had to pay compensation to the promissory purchasers of the units and other investors; and
  • Macau pension fund schemes underwent structural modifications in 2017, through Law No 7/2017, gazetted on 19 June, creating a non-mandatory central pension fund scheme and centralising the supervision of private and public pension fund schemes. Pursuant to the amendments of this law and regulations issued in accordance with it, Macau companies – in particular, insurance companies – have been proceeding with the restructuring of their financial applications related to pension fund schemes.

The Impact of Recent or Expected Legal, Tax or Regulatory Developments and COVID-19

New tax incentives for the financial leasing regime and financial leasing companies, particularly their tax benefits and regulatory and supervisory regime, have been approved in the Macau legislative assembly.

Such incentives include tax exemptions to the Complementary Tax Regulation due to interest resulting from bonds issued by the PRC’s central government, state-owned enterprises and local governments. This exemption comes as part of an ambitious policy package that aims to establish Macau as an international financial hub to capture investment for the PRC government and state-owned enterprises’ bonds.

There have also been no changes in financing, refinancing or restructuring strategies in the Macau restructuring and insolvency market, nor in distressed debt investing, debt trading and/or distressed M&A transactions.

Finally, pursuant to the COVID-19 global pandemic, the Macau government provided a package of relief measures valued at MOP10 billion to companies, which included:

  • a one-off subsidy ranging from MOP15,000 to MOP200,000, depending on the number of employees hired;
  • interest-free financial assistance for small and medium-sized enterprises of up to MOP600,000 each payable over a period of up to eight years, aimed at enhancing operation capability and competitiveness; and
  • a credit guaranty equal to 70% of approved bank loans, capped at MOP4.9 million.

There are no specific laws or statutory regimes for financial restructuring in Macau, and there is no legal framework for out-of-court restructuring, reorganisation or insolvencies/bankruptcies.

Winding-Up and Liquidation

The general regime for the winding-up and liquidation of commercial companies is regulated under the Macau Commercial Code, according to which shareholders may decide to wind up a commercial company by means of a resolution passed by a majority of the shareholders holding at least two thirds of the company’s share capital (v. Section 382 a) CC).

Other circumstances – as provided for in the articles of association or Macau Law (v. Section 315/ 1 CC) – also determine the winding-up of a commercial company, including, but not limited to, the lapse of the term for which it was incorporated (as provided in the articles of association), the extinction of its business scope (eg, companies incorporated to develop a single construction project), or when such scope becomes illegal or impossible. However, the shareholders may avoid the company’s winding-up by resolving to extend the company’s term or change its business scope, as applicable.

A commercial company is also wound up if its activity is suspended (by a resolution passed by the shareholders pursuant to Section 193 CC) for more than three years or, if the shareholders do not pass such a resolution, if no activity is conducted by the company for more than 12 consecutive months.

If the company’s accounts evidence that its net asset value (NAV) is below half of the company’s registered capital, and the shareholders do not resolve either to reduce the capital or to reinstate the NAV with new capital contributions, the company may also be wound up (v. Section 206 CC).

Winding-up also occurs when the company is declared bankrupt, or by virtue of a judicial decision, eg, following an unsatisfactory judicial examination of the company’s accounts (v. Section 211/ 5c) CC).

The shareholders are convened in a general meeting to decide whether a certain circumstance is verified as a cause for winding up the company. Any creditor or the public prosecutor may start judicial action to request a court of law to declare the winding-up and liquidation of the company. Such right is not excluded if the shareholders resolved not to recognise a certain circumstance as cause for the company’s winding-up.

Directors' Duties

It is beyond the scope of directors’ duties to decide on the winding-up and liquidation of the company, but it is their duty to inform the shareholders when a circumstance qualified under the articles of association or Macau Law as cause for winding-up is verified (eg, when the NAV is below half of the registered capital, as per Sections 206/ 1 and 315/ 1g) CC). Pursuant to its winding-up, the company automatically enters into liquidation.

The directors shall prepare the inventory, the balance sheet and the profit and loss accounts as at the date of winding-up.

As a general rule, the director(s) shall serve as liquidator(s) unless otherwise stipulated in the company’s articles of association or otherwise resolved by the shareholders. Any individual can be appointed to act as a liquidator, with the exception of lawyer’s and auditor’s firms, and collective persons/companies.

If the directors do not act as liquidators, they shall surrender to the liquidator(s) all of the company's documents, books, information, monies and goods in their possession. They shall further co-operate with the liquidator(s) by providing any information or clarification required about the company’s activity.

Liquidators' Duties

Within the limits expressly provided in the law, the liquidator has the same powers, duties and liabilities as the directors, and shall, in particular, execute/complete pending businesses/transactions, collect the company’s credits, perform its duties and fulfil its obligations vis-à-vis third parties. Unless otherwise unanimously resolved by the shareholders, the liquidator(s) shall also convert the company’s remaining assets into cash (v. Section 321 CC).

Among other duties, the liquidator(s) also prepares the final accounts (as at the closure of liquidation), the liquidation report and the proposal for the attribution of the remaining assets, which shall be put to the shareholders' approval, but only after payment of all the company’s debts is done or guaranteed.

The costs yet to be incurred in the liquidation procedure (eg, announcements in newspapers or liquidators' fees), as well as any taxes and registration fees still to be paid, are estimated by the liquidator and withheld when sharing the remaining assets between the shareholders.

The liquidation must be reported to the Tax Bureau (v. Section 22 of Law No 15/77/M, of 31 December 1977). The Tax Bureau does not have the authority to disrupt/prevent the extinction of the company following its liquidation, but may act against the liquidator or the shareholders, as applicable, if any misrepresentation is found in the report or any tax is not paid when due.

Bankruptcy and Insolvency

Business entities (both corporations and individual merchants) can be subject to bankruptcy under Macau law, while non-business entities are subject to insolvency. Bankruptcy proceedings commence either with the voluntary submission of the debtor or with a petition submitted to a court of law by any creditor or by the public prosecutor's office. The procedural terms vary depending on whether the proceedings are commenced by voluntary submission by the debtor or by a petition filed by any creditor or the public prosecutor.

Voluntary submission

In the case of voluntary submission, the first procedural stage is intended to provide the necessary information to the court to establish the debtor’s financial situation and the appointment of the insolvency/bankruptcy administrator. It is also designed to prevent the declaration of insolvency/bankruptcy by means of agreement between the creditors, to restructure the company’s debts or, by means of agreement, to legally restructure the company’s business, in which the creditors may agree to the incorporation of a limited company by quotas to continue the activity of the insolvent/bankrupt company. Both the debt and legal restructuring of the debtor are required to be approved by a majority of 75% of the common creditors, and certain rules need to be observed to ensure the non-discriminatory treatment or protection of creditors that may vote against such restructuring. If the restructuring and the legal reorganisation fail, the court will declare bankruptcy.

Petition filed by any creditor or the public prosecutor

If the proceedings are commenced by a petition submitted by the creditors or by the public prosecutor, the first phase of the proceedings is intended to establish the situation of bankruptcy. The debtor is notified to contest the petition, following which, a decision is made by the court.

Duties of the court and administrator

In both situations, the judgment declaring the bankruptcy of the debtor shall decide on the substantive effects of the bankruptcy and appoint the administrator, while the judicial apprehension of all the debtor’s assets shall be entrusted to the administrator. The court may also annul certain transactions made by the debtor prior to the bankruptcy judgment. In the bankruptcy of a company whose shareholders bear unlimited liability (some or all), the court shall further declare the bankruptcy of such unlimited liability shareholders and determine the bankruptcy legal consequences (derivative bankruptcy). Subsequently, the creditors shall claim their credits for the purposes of being recognised and classified by the administrator, and the court will obtain payment of such credits upon liquidation of the bankruptcy assets. Debt restructuring agreements may also be proposed by the bankrupt, and the creditors may also propose and agree on the legal restructuring of the debtor, as referred to above; such agreements suspend the bankruptcy proceedings. Should such agreements not be proposed or not be approved, and when all the credits have been recognised and ranked according to their class, the next stage will be the payment of the creditors, firstly through liquidation of the debtor’s assets and, subsequently, if necessary, in the case of companies with unlimited liability, with the assets of the shareholders with unlimited responsibility, following which, the administrator shall submit its report and final account to the court for approval.

Insolvency and bankruptcy are exclusively regulated by the Macau Code of Civil Procedure, which includes the formal mechanisms available for the financial restructuring and the legal reorganisation of the debtor to be conducted within insolvency or bankruptcy proceedings.

Financial Institutions Subject to Regulatory Supervision

Financial institutions subject to the regulatory supervision of the Monetary Authority of Macau (AMCM) may be subject to management intervention whenever there is a financial imbalance which shows a significant risk of non-fulfilment of obligations towards deposit holders or other creditors, or which could shake the confidence of the economic agents in the financial system in general. Such intervention takes place by nominating one or more government delegates or a management committee to manage the financial institution, or by other measures, such as the temporary suspension of any payments undertaken by such institution.

During the intervention period, no bankruptcy can be declared against the financial institution, except when required by the government delegates or management committee, or when they do not oppose the creditor’s petition for bankruptcy.

Gaming and Other Public Works and Services Concessionaires

Gaming and other public works and services concessionaires may also be subject to government intervention when, inter alia, serious disturbances or deficiencies are verified in the organisation and operation of the concessionaire, or in the general condition of the facilities and equipment used in the concessionaire's operation. Gaming concessionaires may also be requested to provide any guarantee considered appropriate by the government if their adequate financial capacity is at risk.

Legal Obligation

In situations where the requisites are verified and a company is legally obliged to commence bankruptcy proceedings, there is no legal alternative, allowing only for the company to start such proceedings voluntarily (which itself constitutes an obligation of the directors). This is without prejudice to the directors seeking financing to settle outstanding liabilities, which, in abstract terms, they may get from the shareholders or external entities.

Companies and other individual merchants are obliged to file for bankruptcy within 15 days of the non-performance of an obligation that, by respective amount or by the circumstances of such non-performance, objectively shows that such company or individual merchant is not able to fulfil its obligations in a timely manner. For commercial companies, that obligation lies with the directors. Such an obligation exists even when a company is undergoing liquidation (Sections 1047 and 1082 of the Civil Procedure Code), and its breach could result in the civil liability of the directors.

The request for bankruptcy can be filed by any creditor or the public prosecutor.

In order for creditors to be able to start such proceedings, the law states that the debtor must have failed to start voluntary proceedings in situations where it is legally obliged to commence proceedings (see 2.3 Obligation to Commence Formal Insolvency Proceedings). The creditor is required to prove its credit, and to demonstrate that the substantive requisites for bankruptcy are met.

As for the public prosecutor filing the request for bankruptcy, the law requires only that the debtor be in a situation of bankruptcy or presumed bankruptcy.

According to Section 1043 of the Civil Procedure Code, a merchant is considered to be bankrupt when it is not able to meet its obligations in a timely manner. Macau law also stipulates the following circumstances upon which bankruptcy is presumed (Section 1082 of the Civil Procedure Code):

  • when the non-performance of one or more obligations, considering the amount involved or the context of such non-performance, is evidence that the company is not able to fulfil its obligations;
  • when the individual merchants or, in the case of a company, its directors, move away from Macau due to the company’s cash flow issues; or
  • when there is evidence of the dissipation of assets, or fraud in relation to the creditors.

No measurement criteria are specifically provided by law.

There are no specific statutory restructuring and insolvency regimes in Macau Law, but certain preventative measures and mechanisms are available (see 2.2 Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership).

Macau does not have an out-of-court workout and restructuring legal framework, and does not have an autonomous in-court framework, with the in-court system being a step in the insolvency/bankruptcy proceedings.

However, the law does not prohibit out-of-court workouts and restructurings, and the possibility of such depends entirely on the parties’ agreement. Small and medium enterprises in Macau are generally highly supported by the government, particularly regarding bank loans, as there are some regimes of bank loans with government guarantees. This situation not only stimulates the decrease of bank loan interest rates, but also creates positive stimuli for out-of-court consensual financial workouts and restructurings.

There is a general perception among market participants that consensual, non-judicial or other informal restructuring processes are preferable to statutory processes, which, according to the legal regime, imply the formal commencement of insolvency/bankruptcy proceedings.

This is evidenced by the relatively low number of bankruptcy proceedings. A positive factor in this regard may be the government support for small and medium enterprises, particularly in the context of bank loans and, naturally, the favourable economic environment.

Banks, credit funds and other lenders are generally supportive of borrower companies that are experiencing financial difficulties pending a detailed assessment of their financial position. It is difficult to establish whether the applicable insolvency, bankruptcy and creditor rights’ legal provisions interact with and influence the viability, desirability and choice of informal/consensual out-of-court restructuring and workout strategies, as the factors that lead to informal/consensual out-of-court restructuring and workouts may vary. However, Macau insolvency and bankruptcy proceedings, like any court proceedings, are generally burdensome. Macau does not have a formal restructuring “statutory process”. Statutory insolvency/bankruptcy does not require mandatory consensual restructuring negotiations before the commencement of a formal “statutory process”. However, if bankruptcy proceedings are commenced by the debtor, certain restructuring measures are required to be considered by the creditors before bankruptcy is declared, as briefly referred to in 2.1 Overview of Laws and Statutory Regimes.

See 3.1 Consensual and Other Out-of-Court Workouts and Restructurings.

New money is typically injected by the shareholders through share capital increases, quasi-capital contributions and loans.

Should a company be able to secure external financing (eg, from banks or other financial institutions), such lenders typically require priority liens or rights over the company’s assets or additional collateral provided by shareholders or affiliates. In principle, it is not possible for the new investor to obtain super-priority liens to secure respective credits, except when an existing creditor agrees to devalue its guarantee in favour of a new creditor. Super-priority liens or rights normally result directly from the law (eg, tax credits).

General laws and legal principles are applicable to creditors, companies, directors and third parties in their relationship, and this also affects permissible restructuring/workout strategies, conduct, negotiations, transactions and outcomes between and among the company, its creditors, its owners, or third parties, such as the duty of good faith, the prohibition of abuse of rights (Section 326 of the Civil Code), the tort of negligent misstatement (inter alia, Section 478 of the Civil Code), the duty of disclosure, the duty not to operate or vote in an oppressive manner or with prejudicial intent, etc.

Directors are obliged to act in the best interest of the company and, to some extent, the stakeholders.

Creditors’ rights cannot be affected without their consent, except in the context of insolvency/bankruptcy proceedings. However, out-of-court financial restructurings or workouts may eliminate a company’s exposure to bankruptcy and therefore limit the dissent of minority creditors or the stakeholders’ ability to file for bankruptcy.

Credit agreements do not typically contain terms permitting a majority or super-majority of lenders to bind dissenting lenders to amended credit agreement terms. Such a clause would only be valid if it was agreed upon by all the lenders, which typically only happens in syndicated loan agreements. Such terms are usually not included in situations where there are several lenders, since most creditors will not accept their credit being affected by third-party credits.

In general, consensual processes have strong support among market participants in Macau, and they mostly tend to work, even without a credible cram-down feature.

A cram-down mechanism only usually exists in a financial restructuring or workout obtained during insolvency/bankruptcy proceedings. However, such mechanism has a limited range, since it demands that the financial restructuring or workout agreement be approved by an absolute majority of creditors with the right to vote (ie, unsecured creditors, plus secured creditors who have waived their guarantees), holding at least 75% of the credits.

See 2.2 Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership regarding financial institutions and gaming concessionaires.

Macau law establishes the following types of liens/security that may be taken by secured creditors:

  • guarantee deposit, constituted by means of a deposit of cash, debt securities, precious stones, metals and minerals, pledge, mortgage or bank guarantee, or other means of personal guarantee;
  • pledge over any movables, credits or other rights, eg, equity shares, intellectual property or intangible property, with the exception of rights subject to a mortgage;
  • mortgage over real estate and other equivalent assets, such as vehicles, ships and aeroplanes;
  • floating charges over movable property, to secure debts arising out of the business of a company or individual merchant; and
  • trust sale or sale in guarantee, in relation to movable property in favour of another company or individual merchant.

Further to these securities, the law provides more priority claims (or privileged claims) and the right of retention, which generally refers to a security over specific movable or immovable assets in the possession of a creditor and in relation to which that creditor has incurred certain expenses.

Secured creditors have the right to start enforcement proceedings and obtain preferential payment of their credits to the value of the assets that are the object of their liens/security. In an insolvency/bankruptcy context, they have the right to claim their credits and to be paid the value of the assets that are the object of their liens/security with preference.

Macau law does not regulate contractual intercreditor agreements, but the parties have contractual freedom to execute these or equivalent agreements. However, such agreements are only binding on the respective parties, and have no effect vis-à-vis third parties, particularly other creditors.

As referred to in 3.1 Consensual and Other Out-of-Court Workouts and Restructurings, Macau law does not provide for out-of-court restructuring proceedings nor for in-court autonomous restructuring proceedings. In the context of insolvency/bankruptcy proceedings, secured creditors cannot disrupt or block a formal restructuring resolved by a majority of common creditors, as stipulated in the law.

Secured creditor rights, remedies and liens are not subject to automatic or discretionary stays or deferrals of enforcement in proceedings. However, any pending enforcement proceedings, including the enforcement of secured credits, will be suspended and the credit will be sent to the insolvency/bankruptcy proceedings for verification and payment.

In insolvency/bankruptcy proceedings, secured credits cannot be reduced or have their terms modified without the express consent of the respective creditors.

The rights and priorities of secured credits are not uniform, varying according to the type of security.

Generally, all securities allow the creditor the right to preferential payment from the proceeds of the sale of the asset that secures the respective credit. Securities that are effective vis-à-vis third parties – eg, mortgages and pledges over rights subject to registration – grant the creditor the right to enforce its credit and obtain payment from the proceeds of the sale of such asset, even if such asset has been transferred to a third party.

In insolvency/bankruptcy proceedings, secured credits are considered as preferential credits and enjoy precedence in payment over unsecured credits (“common credits”). More specifically, the proceeds from the sale of encumbered assets will first be used to pay the relevant secured credit and only the excess, if any, will be allocated to pay common creditors.

Each secured credit will benefit from such priority payment only in relation to the proceeds from the sale of assets that secure such credit. If the proceeds from the sale of such assets are not sufficient to discharge such credit entirely, the remainder shall be treated as a common credit and the creditor will be treated as a common creditor. On the other hand, only unsecured creditors or secured creditors that have waived their security have the right to participate in the creditors’ general assembly to discuss and, eventually, approve any restricting mechanisms.

See 2.1 Overview of Laws and Statutory Regimes and 2.2 Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership.

Unsecured or common creditors may agree on debt restructuring agreements, which may prevent or suspend a bankruptcy decision.

Pre-judgment attachments are not available.

Priority claims result directly from the law and are not subject to any public registration. There are general priority claims over movable property and special priority claims, which grant payment priority in relation to the proceeds from the sale of specific assets.

General priority claims include the following:

  • claims regarding indirect taxes and direct taxes from the same year and the two years prior to the restructuring and insolvency;
  • claims regarding expenses incurred through a disease suffered by the debtor or dependent persons within the previous six months;
  • claims regarding labour contracts or respective termination relating to a period of six months prior to the respective claim; and
  • claims regarding the expenses of the debtor’s funeral as per domestic custom.

Special priority claims include the following:

  • court fees and expenses incurred in the direct interest of the creditors through the conservation, enforcement and liquidation of certain assets, in relation to those assets;
  • compensation claims for liability in tort, in relation to the amounts due from the insurance company of the debtor;
  • claims to copyright, in relation to all copies of the intellectual work; and
  • property tax and stamp duty tax due for the transfer of real estate property within a year of the seizure of the assets in bankruptcy proceedings and the two years before that, in relation to the real estate assets to which those taxes refer.

General priority claims do not have preference over secured creditor claims. However, specific priority claims may have priority over secured creditor claims if the priority claims' credits arise prior to the secured creditor’s security, with the exception of court fees, which prevail over all priority claims and secured creditor claims. As such, whenever an asset is burdened with more than one security or privilege, the waterfall is as follows:

  • court fees, in relation to the conservation, enforcement and liquidation of certain assets, as previously stated;
  • special priority claims, if the credits arise prior to any voluntary security;
  • right of retention;
  • securities resulting from contracts such as mortgages, pledges, etc (should there be several charges on the same asset to secure several debts in favour of different creditors, the charges registered – when such charges are subject to public registration – or those constituted first, prevail over subsequent charges – priori in tempo); and
  • general movable property priority claims.

All the other credits are ranked as common credits, or junior or subordinated claims (shareholders and other equity rights).

Judicial mortgages and seizures of property are not considered in the graduation of credits, and respective credits will be ranked as common credits.

As previously stated, Macau does not have out-of-court or autonomous in-court restructuring/reorganisation proceedings. Restructuring/reorganisation in insolvency/bankruptcy proceedings is described in 2.1 Overview of Laws and Statutory Regimes and 2.2 Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership.

Cram-Down Mechanism

A cram-down mechanism is available in a financial restructuring or workout obtained during insolvency/bankruptcy proceedings, but has a limited range since it demands that the financial restructuring or workout agreement be approved by an absolute majority of the creditors with the right to vote (ie, unsecured creditors, plus secured creditors who have waived their guarantees), holding at least 75% of the credits.

Debt Restructuring and Reorganisation Agreements

Debt restructuring proposals can only be submitted by the debtor, but creditors are entitled to propose amendments to the debtor proposal. Reorganisation proposals can be presented by the creditors in the creditors’ assembly when no debt restructuring proposal has been submitted by the debtor, or when such proposal has not been accepted.

The law expressly stipulates two types of agreements that can be achieved under such a procedure:

  • debt restructuring agreements, the intention of which is to reduce or modify the payment terms of the debtor’s debts; and
  • legal reorganisation/restructuring agreements, which can only be followed if there is no debt restructuring proposal or if such proposal is rejected; their aim being to continue the debtor’s business through the incorporation of a new company.


There are no limitations on the contents of such agreements when there is consent from all the creditors. When not all the creditors are in agreement, debt restructuring agreements are subject to the following limitations:

  • no full pardon of debts is allowed;
  • no payment extensions are allowed without specifying a new payment date;
  • any debt reduction cannot be determined by the debtor; and
  • no cram-down may set different clauses for common creditors.

Legal Restructuring through Incorporation of a New Company with Limited Responsibility

The law expressly stipulates the possibility of the legal restructuring of the debtor's business through the incorporation of a new company with limited responsibility, where the creditors will be the shareholders of such new company, in order to continue the debtor’s business, which may include other shareholders as well, including the debtor. Creditors that do not accept this agreement are entitled to receive payment of their credits within three years.

Companies in bankruptcy situations have a legal obligation to commence bankruptcy proceedings. Since Macau only establishes restructuring/reorganisation as a procedural stage in bankruptcy proceedings, this formal procedure can only be conducted during a formal bankruptcy procedure in the courts.

Voluntary Out-of-Court Restructuring/Reorganisation

However, parties can start a voluntary out-of-court restructuring/reorganisation before the company is legally obliged to commence bankruptcy proceedings. If restructuring/reorganisation is started after the verification of a bankruptcy situation, such procedure does not have to pass by the court, unless it is submitted to the court as a formal restructuring/reorganisation agreement in the context of a bankruptcy, in which case, it has to be approved by the creditors and the court.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

Refer to 6.1 Statutory Process for a Financial Restructuring/Reorganisation.

See 2 Statutory Regimes Governing Restructurings, Reorganisations, Insolvencies and Liquidations.

Creditors' Claims

In insolvency/bankruptcy proceedings in Macau, the creditors’ claims are initially calculated and recognised by the administrator and subsequently confirmed by the court. In the case of voluntary bankruptcy, preliminary to the bankruptcy declaration, there is a provisional verification of credits for the purpose of allowing the creditors to resolve on debt restructuring agreements or the debtor’s legal restructuring.

Following the declaration of bankruptcy, all known and unknown creditors are summoned to claim their credits, which will be accepted if there is no dispute from the administrator or any other creditor or the debtor. Otherwise, such credit is subject to verification, for which further evidence may need to be produced to establish the existence and extension of the amounts claimed, which will be decided by the court.

Macau law does not have a specific claims trade mechanism, as the trading of credits/claims is subject to the general rules of credit assignment and the assignment of contractual position.

However, if the credits/rights have been challenged, either in autonomous proceedings or in insolvency/bankruptcy proceedings, the assignment of such credits/rights is subject to the regime of litigious credit assignment/assignment of litigious contractual position/rights, according to which such credits/rights cannot be assigned – directly or indirectly – to judges, public prosecutor officials, court employees, lawyers, experts or third parties with any kind of participation in the proceedings.

If the credit assignment or the assignment of contractual position is done while proceedings are pending (eg, in bankruptcy proceedings), the new creditor needs to request to replace the old creditor in the pending proceedings.

After the Declaration of Insolvency/Bankruptcy

Once insolvency/bankruptcy is declared by the court, all the judicial proceedings against the insolvent relating to the insolvent assets shall be attached to the insolvency/bankruptcy proceedings. The insolvency/bankruptcy declaration judgment prevents the filing or continuation of any enforcement procedures against the insolvent/bankrupt. Should bankruptcy proceedings be started by the debtor while preventative bankruptcy measures are in place, the directors of the company continue to carry out its business and the management of its assets, subject, however, to the supervision of an insolvency administrator appointed by the court, who can be assisted by certain creditors designated by the court.

Following the declaration of bankruptcy, the debtor is prohibited from managing and disposing of their present or future assets – ie, those that are included in the bankruptcy, which will be managed by the administrator appointed by the court. The law requires only that such administrator is "suitable", which often leads to the appointment of legal or financial professionals to perform this task, depending on the complexity of the situation.

Contracts executed by the company after insolvency has been declared have no effect in relation to the insolvency assets, with the exception of those contracts against consideration, executed with third parties of good faith before the date of registration of the insolvency decision with the Commercial Registrar.

Some contracts and legal transactions executed before the insolvency declaration sentence may be annulled by the administrator, with retrospective effect to the benefit of the insolvency assets, such as donations executed within the two years prior to the date of the insolvency declaration decision, and legal transactions for consideration executed between the company and any subsidiaries or other companies that control the bankrupt company or its directors within the six months prior to the date of the bankruptcy declaration sentence. From the moment the bankruptcy judgment is issued, the creditors lose their rights to set off their credits against any amounts owed by the debtor/bankrupt.

Creditors are allowed to inspect the accounts, books and all supporting documents, which will be made available for inspection at the court, during the period legally allowed to prepare their claims. Furthermore, once the liquidation of the insolvent assets is completed, the insolvency administrator shall make the accounts, books and other records available to creditors for their examination and the submission of any complaints.

Secured and Unsecured Creditors

Basically, there are two classes of credits: secured and unsecured, with the former taking priority over the latter. The preferential creditors shall be paid immediately with the sale proceeds of the assets over which their credits are secured in rem. If such is not sufficient to pay them in full, their remaining credits shall be settled, together with the non-secured credits, with the values obtained from the liquidation of other assets.

See 5.5 Priority Claims in Restructuring and Insolvency Proceedings regarding the rank of secured creditors. If the assets are not sufficient to pay common creditors fully, they will be paid on a pro rata basis, based on the relative value of their credits and the total assets available.

End of Insolvency

The insolvency proceeding ends in relation to the insolvent:

  • when arrangement or agreement is reached with the creditors and confirmed by the court;
  • after the full payment or waiver of all the credits that were recognised and verified;
  • by the end of a term of five years after the court confirmation decision approving the final accounts presented by the insolvency administrator; or
  • when no criminal proceedings are filed, and the court considers that the bankrupt, or its directors, were found not liable for bankruptcy.

During bankruptcy proceedings, the bankruptcy administrator has the power to execute the ordinary administration of the bankruptcy assets; whereas powers regarding non-ordinary duties are contingent to the permission of the public prosecutor. Liquidation of the assets only commences after the bankruptcy judgment becomes final (res judicata). The sale of the assets is made by the administrator, subject to the orientation of the public prosecutor.

The purchaser acquires good title in a sale of assets in a liquidation procedure. Such title must be free and clear from any and all securities over the assets, as well as third-party rights, with the exception of the following third-party rights:

  • rights in rem that were registered prior to the creditors' securities (eg, usufruct, easements, etc); and
  • other rights constituted before the registration of any guarantee or seizure of the assets that are effective vis-à-vis third parties, irrespective of registration (eg, tenancy agreements).

The sale of an insolvent company’s assets may be done judicially, which takes place by means of bids submitted in a sealed envelope, or non-judicially, by:

  • sale to a third party who may have the right to purchase a certain asset (eg, a promissory purchaser);
  • private sale through negotiation; or
  • sale through an auction firm.

Judicial Sale

The form of the sale is determined by the public prosecutor, who also determines the base value of the assets. In the case of a judicial sale, no proposals below 70% of the value of an asset shall be considered, unless the public prosecutor determines a different percentage. The public prosecutor shall also determine the minimum threshold for private sales. Any bids made during a judicial sale are binding and enforceable.

Private Sale

The private sale is conducted by the administrator as representative of the estate. Any creditors may bid in the process and may informally submit proposals or suggestions as to the value of an asset to influence the public prosecutor’s decisions on the form of the sale and any private negotiations taken by the administrator. Should there be significant discrepancies in the suggestions regarding the value of the assets, or whenever it otherwise deems necessary, the public prosecutor may obtain an independent valuation or other form of assessment of the value of an asset, before determining the base value of an asset.

Voluntary Bankruptcy

In voluntary bankruptcy proceedings, the debtor may complete any transactions begun prior to any bankruptcy judgment, subject to the supervision of the administrator and the creditors, and provided that such action does not reduce the debtor's assets or modify the creditor’s position.

Bankruptcy Judgment

Following a bankruptcy judgment, the management of the bankruptcy estate is entrusted to the administrator, who may complete any transactions in the ordinary course of business or; with the public prosecutor’s authorisation, any non-ordinary transactions, provided that such transactions are in the interest of the estate and within the scope of the bankruptcy proceedings. Should there be any binding sales agreements pending completion, such as promissory agreements, the position will depend on whether the bankrupt is acting as vendor or purchaser. Should the bankrupt act as purchaser, the vendor has the right to complete the sale, with the payment of the respective consideration being subject to the insolvent assets. If the vendor does not exercise such right, the administrator has the power to decide whether to complete or terminate the transaction, subject to the public prosecutor’s consent.

Should the bankrupt act as vendor, and ownership of the asset has not yet been transferred to the purchaser, the administrator may also decide to complete or terminate the transaction, subject to the public prosecutor’s consent, in which case, the purchaser shall have the right to claim compensation for losses from the estate.

Creditors are called to a general meeting when they need to make decisions on matters regarding their competence. All accepted creditors are admitted, and their voting rights depend on the relative amount of respective credits. During preventative procedures, the court designates one or more creditors to assist the insolvency administrator. Although no criteria are legally defined, the largest creditors are often selected.

The bankruptcy of a company with a head office in Macau is subject to the exclusive competence of the Macau courts. In relation to those companies, no foreign judgments may be recognised. Foreign insolvency or bankruptcy awards in relation to other companies may be enforced in Macau following their respective revision and recognition by the Macau courts. The recognition system is essentially of a formal nature, with few exceptions of a substantive nature. The requirements for the recognition of foreign awards are as follows:

  • there can be no doubts in respect of the authenticity of the document containing the decision;
  • the decision is final and became res judicata in the jurisdiction in which it was issued;
  • the decision was issued by a competent court, and such competence did not result from fraud;
  • there is no pending cause (lis pendens) in, or res judicata decision issued by, the Macau courts;
  • the defendant has been duly summoned in the proceedings and the principles of adversarial proceedings and of the equality of parties have been observed; and
  • the confirmation of the award will clearly not be offensive to Macau public order.

The courts in Macau do not enter into protocols or other arrangements with foreign courts to co-ordinate proceedings, except where there is an international judicial agreement for such purpose. There is no such agreement specifically in relation to bankruptcy or insolvency proceedings.

Pursuant to conflict-of-laws rules, the governing law of matters related to legal persons is the law of the place where the principal and effective head office of the company is located. According to civil procedural law, Macau courts are exclusively competent to declare the bankruptcy of companies whose head office is located in Macau.

Foreign creditors are dealt with in the same manner as local creditors in the respective proceedings.

In Macau, only an administrator and, in certain cases, an accounts auditor are appointed by the court in bankruptcy/insolvency proceedings.

During preventative procedures, the court designates one or more creditors to assist the administrator.

The duties and functions of the administrator are as follows:

  • liquidating the bankruptcy estate and paying the company's debts;
  • recovering credits;
  • adopting measures or actions deemed necessary and convenient for the conservation of, and for generating revenue from, the assets and other rights of the company, as well as for the management of the company's business in order to prevent further deterioration of its financial position;
  • regularly presenting information with regard to the status of the administration and liquidation of the estate; and
  • preparing accounts and doing respective reporting throughout the proceedings.

The administrator should act in the interest of the company and its creditors, under the supervision and orientation of the public prosecutor, and report directly to the court. The creditors, the bankrupt and any third parties affected by the administrator’s decisions may appeal such decisions or actions to the court.

See 9.2 Statutory Roles, Rights and Responsibilities of Officers.

The company directors are obliged to collaborate in any way requested by the administrator. Neither the creditors nor the insolvent company directors can serve as an insolvency administrator, but they may propose the person to be appointed as administrator.

Attorneys, accountants or other professionals may serve as insolvency administrators.

The directors or managers of a financially distressed or insolvent company have a duty to file for bankruptcy voluntarily within 15 days of non-fulfilment of one or more obligations that demonstrates the inability of the company to fulfil its obligations promptly, due to the amount or circumstances of its non-fulfilment.

The corporate directors may be sanctioned in civil or criminal terms for their conduct if the insolvency is considered to be due to their mismanagement.

No legal guidelines are stipulated to define when a company or individual merchant is regarded as being unable to meet its obligations in a timely way. See 2.5 Requirement for Insolvency.

Directors are required to act in good faith and in accordance with the duties of good care and diligence.

Directors are required to act in good faith and in accordance with the duties of good care and diligence. As stated above in 2.1 Overview of Laws and Statutory Regimes, directors are obliged to report to the shareholders when the NAV of the company drops below half of its share capital, which serves as a warning signal to the shareholders.

As mentioned in 10.1 Duties of Directors, directors may be held personally liable for losses directly caused to creditors due to the breach of any obligations within the law or the articles of association of the company that serve to protect creditors. One such provision is the legal obligation to file for bankruptcy voluntarily when a bankruptcy situation is verified, such as following the preparation and approval of annual accounts or an annual budget.

Bankruptcy may be classified as culpable when the situation was created or aggravated as a result of intentional conduct or gross negligence by the debtor or its director.

Insolvency is always classified as intentional if the directors or managers have practised the following acts with the intention to prejudice the creditors:

  • destroying, damaging, hiding or making the debtor's assets disappear, or rendering them unusable, in whole or in substantial part;
  • artificially reducing the debtor's assets, dissimulating things, invoking supposed debts, recognising fictitious credits, inciting third parties to present them, or simulating, in any other way, a lower equity situation, in particular by means of inaccurate accounting or false balance; or
  • purchasing goods on credit, reselling them or delivering them in payment for substantially less than the current price.

In such cases, the directors or managers shall be criminally liable and punished with a prison sentence of up to five years, or with a fine of up to MOP6 million.

The bankruptcy judgment determines the directors’ disqualification from acting as directors of any civil or commercial company, and from operating any business until both the civil and criminal effects of the bankruptcy expire.

If the directors are personally liable to the creditors due to their mismanagement in the terms listed above, the creditors may file claims directly against the directors, irrespective of the insolvency/bankruptcy proceedings.

Certain historical transactions are unconditionally subject to annulment, including:

  • any gratuitous transactions that reduce the bankrupt estate, executed within the two years prior to the bankruptcy judgment; and
  • transactions executed within the six months prior to the bankruptcy judgment with companies directly or indirectly controlled by the bankrupt, or with subsidiaries or dominant shareholders of the company declared bankrupt, or with its directors.

Other transactions may be declared ineffective vis-à-vis the estate if the following circumstances are verified:

  • that the transactions are not of a personal nature;
  • that the transactions resulted in a reduction of the debtor’s net assets;
  • that it has become impossible to pay the creditors in full as a result of such transactions, or that they simply aggravate such an impossibility; and
  • that the creditors’ rights existed prior to such transactions or, where the creditors’ rights were subsequent to the transactions, that the debtor has acted with the intention to frustrate future creditors’ rights.

Certain transactions are expressly presumed to be executed in bad faith for the purposes of setting aside the transaction, such as when a real estate security is constituted subsequent to the guaranteed obligation, within a period of one year prior to the bankruptcy decision.

Special rules apply to previously executed but not yet completed and ongoing transactions.

Refer to 11.1 Historical Transactions regarding transactions that are subject to annulment. The creditors’ rights to declare other transactions ineffective vis-à-vis the estate are subject to a statute of limitation of five years from the date of the respective transaction.

During the insolvency process, the insolvency administrator (with the authorisation of the public prosecutor) and any individual creditor may file for the annulment or setting aside of historical transactions. Actions in relation to incomplete or ongoing transactions are to be taken over by the administrator, with the authorisation of the public prosecutor.

As mentioned previously, there are no autonomous restructuring proceedings. Such claims shall form separate proceedings, but shall be attached to the insolvency/bankruptcy proceedings.

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Law and Practice


Riquito Advogados provides legal services to a diverse range of clients in various industries, but has a particular focus on corporate clients. The firm has five qualified lawyers in offices in Macau SAR and Lisbon, Portugal, and its key practice areas are corporate/M&A, contracts/contractual investment, restructuring, litigation and arbitration, IP, foreign investment, corporate finance, real estate, aviation, private equity, project finance, labour and taxation.

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