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In its Annual Report on Commercial Adjudication of Commercial Trials (2025), issued on 24 February 2026, the Supreme People¡¯s Court called for closer integration between out-of-court restructuring and judicial reorganisation, and voiced support for further experimentation with new out-of-court restructuring models.

Before that, more than a dozen out-of-court ¡°restructuring centres¡±, had already been set up in Shanghai, Guangdong, Jiangsu, Zhejiang, Sichuan and elsewhere. Their purpose is to help distressed companies, creditors and stakeholders negotiate restructuring plans or settlement agreements to resolve debt burdens and improve balance sheets through law-based processes.

Restructuring centres

By May 2026, more than 30 restructuring centres were established across China at various administrative levels. Depending on their sponsors or supervising authorities, they fall broadly into three categories.

First, some were set up by trade and professional associations, such as local economic and trade promotion bodies and associations of bankruptcy administrators.

Second, some were launched by local judicial authorities, including centres in Wujin district of Changzhou; Yangzhou; Suzhou (including the Intermediate Court, as well as the industrial park, high-tech zone, and Wujiang district); and Zhengzhou.

Third, some were initiated by administrative authorities or jointly established by administrative authorities, courts and trade or professional associations.

The identity of the sponsoring body is not merely a matter of form; it helps define the limits of a centre¡¯s co-ordinating capacity and driving force.

Core functions

Across local rulebooks, the restructuring centres generally perform five main functions.

(1) They identify debt risk, assess restructuring value and test feasibility. Centres and their restructuring advisers typically review information on assets and liabilities to determine whether a distressed business has genuine restructuring or settlement value and then issue a professional opinion.

(2) They mobilise resources. Through their own databases of investors, financiers and professional service providers, or by drawing on the networks of sponsors or supervising authorities, centres can introduce investors, funding sources or advisers on a market basis.

(3) They bridge into court proceedings. Once the out-of-court work is completed, a centre may submit a statement to the court describing the debtor¡¯s restructuring efforts and make a presentation on the negotiation process and its outcome, enabling out-of-court debt clearance and restructuring to receive in-court judicial confirmation.

(4) They enhance the capabilities within the special situations and distressed-investing sector. Successful debt restructuring often turns on bringing in partners with industrial expertise and financing capacity; by improving the knowledge base of participants beyond bankruptcy administrators and other professional service providers, the centres can help the special situations sector flourish and help more companies restructure. Some centres also use information sharing, professional briefings and meetings to improve participants¡¯ judgment and execution.

(5) Some handle personal debt resolution. In Shenzhen, an early testing ground for personal bankruptcy, the Procedural Rules for Out-of-Court Restructuring and Settlement Services expressly establish a mechanism for co-ordinating personal debt, giving the relevant centres a defined role in that area.

How they operate

For all their institutional variety, the centres¡¯ work with distressed companies follows a process that leans heavily on the well-established workflow under the Enterprise Bankruptcy Law.

That includes verifying claims, investigating assets, dealing with labour issues, handling executory contracts and pending litigation and drafting restructuring plans or settlement agreements. This overlap will also be the natural starting point for closer co-ordination between the centres and bankruptcy courts.

What practice shows

Some large companies and listed groups have shown a willingness to use restructuring centres to carry out debt workouts. Practice has already produced cases in which an out-of-court restructuring process has effectively paved the way for a formal reorganisation. In one case involving a large corporate debtor, the company spent about four months in restructuring at a centre, followed by just over a month of pre-reorganisation, before its reorganisation application was accepted.

Because the proposed reorganisation plan was built on the earlier restructuring agreement, swift court approval appeared within reach. In that case, liabilities were about RMB3.4 billion (USD502.2 million), the market value of assets about RMB2.1 billion, and liquidation value about RMB1.3 billion. Even on a liquidation value basis, recoveries were materially above average market levels.

Some courts have also treated participation in an out-of-court restructuring as one reason to terminate the current round of enforcement proceedings. In enforcement ruling Ning 0105 Zhi (2024), the court recorded that it had received notice from the Suzhou Industrial Park Court that the judgment debtor was undergoing out-of-court restructuring and that the applicant had already filed its claim in that process; it therefore terminated the current enforcement proceedings.

In addition, restructuring centres in Shanghai, Guangzhou and Zhejiang allow debtors or creditors, within prescribed limits, to nominate restructuring advisers, waive conflicts of interest through informed consent, and afford priority to candidates recommended by the debtor. This approach fully embodies market-driven principles and helps secure the debtor¡¯s buy-in and support for the restructuring process.

Formal proceedings still needed

Like the pre-reorganisation regime, the rules governing out-of-court restructuring sit low in the legislative hierarchy, and practice remains at an early stage. Many restructuring centres also possess the attributes of trade or professional associations, meaning that winning the trust of state-owned enterprises and financial institutions may still take time.

In many cases, out-of-court restructuring must be paired with formal insolvency proceedings to secure judicial recognition. In case Hu 03 Po 246 (2025), for example, the court found that the debtor had spent four months negotiating a restructuring plan with a prospective investor and major creditors.

However, because financial creditors are unable to sign the out-of-court agreement, formal judicial intervention remained necessary. The debtor subsequently applied for pre-reorganisation, and its formal reorganisation application was accepted by the court just more than a month later.

Wang Zhenxiang is a partner at Jingtian & Gongcheng