JC Master Updates | Attorney Xu Tao, Head of Our Office’s Bankruptcy Team, Supports Shuntian Company’s Rebirth Journey

“In such a booming market, to see this long-established tourism company collapse like this is truly a great pity!” said Wang Jing, Chief Judge of the Nanjing Bankruptcy Tribunal of the Intermediate People’s Court of Nanjing, Jiangsu Province, as she sorted through the case files.

What struck her was a small travel agency in Nanjing with registered capital exceeding 30 million yuan—Jiangsu Shuntian Overseas Travel Co., Ltd. (hereinafter referred to as Shuntian). Founded in 1998, the company has been deeply engaged in both domestic and international tourism for nearly three decades and has been consecutively recognized as a “Five-Star Travel Agency” for many years.

It was precisely this heartfelt remark of hers that brought hope to Shuntian Company’s rebirth.

In 2020, Shuntian Company’s business performance took a sharp downturn: management was in disarray, and key talent kept leaving; its business model remained outdated, causing it to miss the opportunity presented by the convergence of culture and tourism; and insufficient working capital left its tour itineraries unsustainable. Only when suppliers and partners came knocking, demanding repayment of outstanding debts, did Shuntian realize that its liabilities had long since far exceeded its capacity to bear them.

“We’ve tried many solutions, but unfortunately none have been able to resolve the company’s debt issues,” said Zhu Maojia, head of Shuntian Company.

In March 2024, left with no other option, the creditors filed a petition with the court to initiate bankruptcy reorganization proceedings against Shuntian Company.

The application documents were delivered to Wang Jing, who, upon reviewing them, expressed deep regret. Fortunately, Shuntian Company demonstrated a strong desire to turn over a new leaf, and the creditors were likewise willing to grant the company a chance to catch its breath.
 

What is the true state of the company’s operations? How feasible is its restructuring? Wang Jing conducted a detailed inquiry with Shuntian Company, gathering information on its assets, liabilities, and operational performance. Drawing on the company’s annual report for the previous year and other relevant documents, she outlined Shuntian’s current situation: a “small” enterprise with “light” assets and significant growth potential.

 

Shuntian Company does not own any real estate or other significant assets; its most valuable asset is its comprehensive suite of tourism‑business operating licenses. The company holds all the necessary authorizations issued by the Ministry of Culture and Tourism, covering domestic tourism, inbound and outbound tourism, and tours to Taiwan. According to information obtained from the competent authorities, the application requirements and eligibility criteria for this full set of licenses are relatively stringent. Although Nanjing is home to nearly a thousand travel agencies, very few—like Shuntian—possess such a complete array of tourism‑business operating permits.

“In accordance with the guiding principles set forth in the Minutes of the National Courts’ Conference on Bankruptcy Adjudication, our preliminary review indicates that the company possesses substantial reorganization value,” said Wang Jing.

Meanwhile, as one of the port cities nationwide implementing the 144-hour visa‑free transit policy, Nanjing has seen a rapid surge in inbound tourism, which undoubtedly offers Shuntian Company—a office currently facing challenges—a promising vision for its post‑restructuring future.
 

“Reorganization is feasible!” Wang Jing quickly reached her conclusion, but a pressing challenge soon emerged: how should the value of Shuntian Company’s tourism‑business operating licenses be reasonably determined?

In practice, there is neither a uniform standard nor a substantial body of precedent to draw upon, making it even more difficult to determine the value through an appraisal process. Moreover, devising a complex valuation procedure that is time‑consuming would not only hinder a company’s swift exit from its debt distress and recovery but also fail to significantly enhance creditors’ recovery rates. After careful consideration, Xu Tao, the head of the bankruptcy administrator, proposed to the collegiate panel whether a more efficient and cost‑effective approach could be adopted—namely, establishing a range for the valuation by referencing recent industry‑wide acquisition cases involving companies with overseas tourism qualifications.

Under the court’s guidance, the bankruptcy administrator compiled acquisition proposals from tourism companies in Jiangsu Province that held licenses to engage in inbound and outbound tourism. By comparing factors such as company size, scope of operations, and financial performance, and taking into account the appraised values of office equipment—including computers—determined by an appraisal office, the final restructuring investment price for Shuntian Company was set at RMB 2.45 million.

Following an open solicitation, Jiangsu Jinling Tourism Investment Management Group Co., Ltd. (hereinafter referred to as Jinling Tourism Investment) was selected as the restructuring investor for Shuntian Company. Under the restructuring plan, all of Jinling Tourism Investment’s investment will be used to settle Shuntian’s bankruptcy‑restructuring expenses and various creditor claims, and in return, it will acquire 100% of Shuntian’s equity. Employee wages, taxes, and social security liabilities will be fully repaid, while the repayment rate for ordinary creditors has increased by nearly ten percentage points compared with the liquidation scenario. Going forward, Jinling Tourism Investment will inject additional funds as needed to restore the company’s operations.

There remains one crucial step before the reorganization can be successfully completed: the vote on the draft reorganization plan. In practice, reorganizations involving small and micro enterprises often encounter voting deadlocks, owing to the low repayment rate for ordinary creditors and their limited willingness to participate. As a result, these creditors frequently waive their voting rights during the ballot, thereby undermining the formation of a valid resolution.

To expedite the revival of Shuntian Company, during the proceedings, the collegiate panel actively explored and implemented the “deemed‑approval rule”: at the stage of filing bankruptcy claims, the bankruptcy administrator and creditors entered into a written agreement stipulating that failure to raise an objection by the voting deadline would be deemed consent. This rule substantially shortened the voting period and markedly enhanced the efficiency of the reorganization process. Following its application, the bankruptcy administrator and 31 creditors executed a written agreement; prior to the voting deadline, no one lodged an objection to Shuntian Company’s reorganization plan, enabling the reorganization to proceed smoothly.

“This case took only four months from acceptance to the conclusion of the reorganization proceedings, and the implementation of the reorganization plan was completed two months ahead of schedule. The high efficiency and positive outcomes have also provided valuable experience for future work,” said Yao Zhijian, a member of the Party Leadership Group and Vice President of the Nanjing Intermediate People’s Court.

In recent years, in order to strengthen bankruptcy protection for small and micro enterprises, the two-level courts of Nanjing have continuously deepened the implementation of the “Work Plan on Promoting Bankruptcy Protection for Small and Micro Enterprises (Trial)” issued by the Nanjing Intermediate People’s Court, thereby increasing the application rate of the bankruptcy protection mechanism for such enterprises and enhancing their ability to recover.
 

“We have now paid off all our debts and moved into a brand-new office space. Our new employees are highly motivated, eager to seize the opportunity presented by Nanjing’s development as a pivotal city along the Yangtze River International Golden Tourism Belt,” said Zhu Maojia, expressing great optimism about the company’s future.

Through the expansive floor-to-ceiling windows, the breathtaking vistas of Jinling City unfold slowly, and a new chapter for Shuntian Company is about to begin right here.