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China's legislature passed a corporate-bankruptcy law, a long-awaited step toward enhancing the market-oriented rules governing the world's fourth-largest economy.
The Enterprise Bankruptcy Law was approved after 12 years of drafting and deliberation. To take effect on June 1 2007, it will replace rules issued in 1986 that applied only to state-owned enterprises.
Current Rules
The current Law of P.R.China on Enterprise Bankruptcy was adopted at the 18th Meeting of the Standing Committee of the Sixth National People's Congress and promulgated by Order No. 45 of the President of the People's Republic of China on December 2,1986. [Full Text]
Background
v 1994. The drafting of a new bankruptcy law was launched.
v 1998-2003. The drafting of a bankruptcy law was listed as part of the five-year legislation program of the Standing Committee of the 10th NPC.
v 21 Jun 2004. The draft bankruptcy law was delivered to the 10th session of the Standing Committee of the 10th NPC for the first deliberations.
v 22 Oct 2004. The draft bankruptcy law was delivered to the 12th session of the Standing Committee of the 10th NPC for more deliberations.
v 22 Aug 2006. The draft bankruptcy law was delivered to the Standing Committee of the NPC for the third round of deliberations.
China's legislature passed a corporate-bankruptcy law, a long-awaited step toward enhancing the market-oriented rules governing the world's fourth-largest economy.
Bankruptcy Law Meets Needs of Market
When Zou Hailin was first invited to take part in the drafting of China's new bankruptcy law in 1994, he hardly expected that it would take 12 years for the legislation to see the light of day.
Bankruptcy Law Sees Light of Day
China has removed another obstacle in the way of becoming a market economy by introducing a bankruptcy law.
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Innovative Aspects
[1]. The new law will apply to all kinds of enterprises and financial institutions.
[2]. The new law introduces a trustee system to make the operation of the bankruptcy process more susceptible to market forces.
[3]. The new law also provides for the establishment of a bankruptcy restructuring system complete with liquidators.
[Read More]
Opinions
v "The provision is a compromise that aims to protect both creditors and workers of insolvent enterprises."
--Cheng Siwei, vice-chairman of the NPC Standing Committee.
v "The new law embodies the notion of putting people first, as it fully considers worker's interests. At the same time it accords with standard international practice in better protecting lenders' interests."
--Jia Zhijie, member of the NPC Standing Committee.
v "The new law would help boost the confidence of foreign investors thinking about investing in businesses in China."
--Wang Xin, a law professor at Renmin University.
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