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JunHe Assists in the Reorganization of Shanghai Dunfufang Industrial Company


Shanghai Dunfufang Industrial Co., Ltd. (“Dunfufang”) was established in 2007 with a registered capital of RMB 3 million. Its principal business is the development and construction of 13 plants for leasing and property management. Due to a delay in the construction project payments, Dunfufang was involved in more than 10 enforcement cases, with a total amount of RMB 250 million.  The enforcement court transferred the cases to the Shanghai Third Intermediate People’s Court (the “Court”) for a bankruptcy liquidation review. Dunfufang petitioned for reorganization on the grounds that it had a going-concern value, and the Court accepted the petition.

Dunfufang’s 13 plants are located in Songjiang District, Shanghai, and have a valuation of RMB 172 million. The divided plants are leased out to tenants who operate different forms of businesses and some have constructed illegal buildings and structures. After a review, it was confirmed that 26 creditors had claims of RMB 422 million against Dunfufang, and the repayment rate of ordinary creditors was only 2.52% in the liquidation simulation. 10 out of the 13 plants had not applied for property right certificates due to inspection failures. 

JunHe was the legal advisor to the reorganization investor.  Within an extremely short period of time, JunHe’s team completed the legal due diligence on the 13 plants registered to Dunfufang. They conducted in-depth evaluations of the obstacles in the completion inspection and acceptance documents. They also investigated the expectation of obtaining the property right certificates without sufficient application materials, and helped the client recognize the value of a reorganization of the company. JunHe assisted the investor during the entire process of the reorganization investor registration, the negotiation of the reorganization investment agreement, the drafting of the reorganization investment scheme, the implementation of the reorganization plan, and the communication and coordination with the governmental authorities. JunHe provided professional legal advisory services throughout the deal for the reorganization investor.

According to the draft reorganization plan, the investor plans to change the factory into an industrial park specializing in military electronic information. According to the repayment schedule of the reorganization plan, the preferred creditors, employees’ claims, and social security and tax claims will be fully repaid, and the repayment rate of the ordinary claims will increase from 2.52% to 7.91%. The draft reorganization plan was approved at a creditors’ meeting. The Court ruled to approve the reorganization plan and terminated the reorganization proceedings in accordance with the second paragraph of Article 86 of the Enterprise Bankruptcy Law.

This case was recently selected as a 2022 representative case by the Shanghai Bankruptcy Court. It was selected due to its significance in resolving more than 10 historic enforcement cases by revitalizing the plants through converting an enforcement case into a bankruptcy case. JunHe resolved all the historical enforcement cases into a lump sum. By converting the enforcement case into a bankruptcy case, the advantages of the general and collective repayment system was brought into play, and more than 10 enforcement cases in an amount of RMB 250 million were resolved at once, effectively solving the enforcement difficulties. During the review, the company’s salvage value was discovered and the reorganization proceedings were initiated to save the company. By revitalizing the core assets of the company, the continuous operation of the company was achieved, and the repayment interests of all the creditors were realized.

JunHe partner LIU, Zhengdong led the deal team and JunHe counsels WU, Ling and LIU, Xin undertook the work.

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