The PRC law is silent as to whether an Ipso Facto clause (e.g., a clause granting a party the right to unilaterally terminate the contract in the event of the other party's bankruptcy) would prevent the administrator from exercising the right to terminate or continue performance of the outstanding contracts. That said, we came across case precedents where the court opined that bankruptcy law is a special law and hence prevails over contract law.

Therefore, if the non-insolvent party exercises the termination right (the sooner the better) before the administrator is appointed under the PRC law, it is then in a position to argue that the administrator cannot request the continued performance of a contract that has already been terminated. If however, the non-insolvent party does not exercise its termination right in a timely manner (which means that the contract is still in force), the court may take the view that only the administrator has the right to terminate the contract despite the existence of an Ipso Facto clause in the contract.

In practice, there is a time lag between the court's acceptance of a bankruptcy application and the appointment of the administrator, which ranges from several days to months.