News
Wu Bangguo, Chairman of the Standing
Committee of the National People's Congress said
recently that preliminary deliberation of the new
draft bankruptcy law would begin in June 2004. He
said that the new bankruptcy law would be an important
law for improvement of the socialist market economic
system.
Source: People's Daily Online April 6, 2004.
- Law
of the People's Republic of China on Enterprise
Bankruptcy (for Trial Implementation) 1986
-
New law has been drafted by not yet adopted by
National People's Congress.
-
Civil Procedures Law of 1982 (Chapter 19 Bankruptcy
Procedures for Legal- Person Enterprises, amended
1991)
The 1986 Enterprise Bankruptcy Law applies only
to state-owned enterprises. Approval of the relevant
department in charge has first to be obtained before
bankruptcy proceedings against an enterprise can
be initiated under this law.
Enterprises that have legal person status are
subject to the insolvency provisions found
in Ch 19 of
the Civil Procedure Law, which will have effect
where the provisions of the 1986 Enterprise Bankruptcy
Law do not apply and where the provisions of
the 1986 Enterprise Bankruptcy Law are
in conflict
with the Civil Procedure Law.
The Draft Bankruptcy Law deals with the insolvency
or bankruptcy of (a) enterprise legal persons,
(b) partnership enterprises, (c) sole proprietorships
and (d) other economic organisations established
under the law. There are special provisions
for state-owned enterprises. The law does
not directly
apply to non-business (consumer) bankruptcies.
The test of insolvency is the inability to
pay debts and this can be deemed if the debtor
ceases
payment.
There are three types of insolvency procedures
in the new draft law:
- Liquidation
- Reorganisation
- Composition
Commencement of a bankruptcy case is by
application and acceptance
by the people's courts. A
judge appoints an administrator
and a moratorium applies barring further
civil recovery
action by the
creditors.
Repayment priorities in the
draft law mirror those in the
1986
Enterprise Bankruptcy
Law and the Civil
Procedure Law.
Under the new draft law the
department in charge of
state-owned enterprises
must still
consent
to the initiation of bankruptcy
proceedings against those
enterprises.
Role
played by Government
Departments in charge of state owned enterprises
must give consent to the commencement of bankruptcy
proceedings against those premises.
Role
played by private sector practitioners
Courts
appoint private sector practitioners to be administrators
and liquidators under the
new draft law.
The insolvency profession is still in a process
of development in the People's Republic of China.
At the present time there is no system of registration
or licensing of practitioners.
The required qualification for appointment
of an administrator or liquidator by the
People's courts
is someone with the 'professional knowledge needed'.
Practitioners
are mainly lawyers, although accountants are
also involved. Some persons
are disqualified
from being appointed as an administrator or
liquidator and this includes someone with
a conflict of
interest or a convicted criminal within five
years of the
completion of their punishment.
There are no rules for dealing with complaints
against practitioners and for removing them
from cases.
Role
played by the Court
Judges are becoming more experienced in dealing
with bankruptcy cases. There is no bankruptcy specialisation
in the courts system. The People's courts deal
with all bankruptcy cases. Their role includes
accepting the case as a bankruptcy case; approving
reorganisation proposals that have been approved
by creditors and appointing administrators and
liquidators.
Does
the insolvency system in China allow
for:
1.
|
Different
procedures for the insolvency of individuals
and the insolvency of companies? |
|
 |
2.
|
Creditors
to accept an arrangement outside of formal
bankruptcy/liquidation proceedings? |
|
|
3.
|
Priority
payment for employee creditors? |
|
|
4.
|
Priority
payment for taxation debts? |
|
|
5.
|
Automatic
disqualification of directors of failed companies
from managing other companies? |
|
|
6.
|
Recognition
of insolvency proceedings being conducted
in another jurisdiction? |
|
|
7.
|
A
government agency to undertake insolvency
administration work? |
|
|
8.
|
Some
form of licensing of private sector practitioners? |
|
|
9.
|
A
review of the remuneration claimed by an
insolvency practitioner by either a court
or other government regulator? |
|
|
10.
|
A
mandatory scale of fees applicable to insolvency
practitioner remuneration? |
|
|
11.
|
Surveillance
of the work of private sector practitioners
by a government regulator? |
|
|
12.
|
Collation
of insolvency statistics by a government
regulator? |
|
|
|
