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Bankruptcy laws need review
03/17/2003
China Daily
The country is in urgent need of a new bankruptcy law to ensure
that failed non-State-owned enterprises can, where viable, continue
to trade and also to better protect the interests of their creditors.
Wang Liming, a leading civil law professor with Renmin University
of China, made the appeal to the first session of the 10th National
People's Congress (NPC).
"The market economy is a competitive one in which enterprises
must follow the rule that the fittest survives fierce competition,"
said Wang, who is also an NPC deputy.
He said a sound bankruptcy mechanism will encourage those enterprises
concerned to try and survive and develop in the face of competition.
The Standing Committee of the Sixth NPC adopted a bankruptcy law
for trial implementation in 1986, when China's economic reform was
still in its infancy. The law only applies to State-owned enterprises.
However, a variety of businesses have emerged in the past two decades
as reforms have deepened, including Chinese-foreign equity joint
ventures, Chinese-foreign co-operative joint ventures and domestic
or foreign solely invested corporations.
Currently, any bankruptcy concerning these newly emerged enterprises
does not fall within the remit of any specific legal powers, Wang
said.
He further complained that the current legislation lacks many basic
and important rules for bankruptcy.
For example, it does not make any specific provision concerning
the restructure of the firm concerned, a measure which could effectively
help those large or medium-sized companies on the brink of bankruptcy
to survive, said Wang.
He added that the incomplete stipulation concerning the liability
of bankrupt firms allows debtors to abuse the existing bankruptcy
mechanism by transferring their assets to avoid payment of their
debts to the detriment of their creditors' interests.
"The nation should work out a new law with a sound bankruptcy
mechanism especially since its accession to the World Trade Organization,"
Wang said.
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