Comparison and Case Application of New and Old Topics in the Enterprise Bankruptcy Law

Author: Tang Weijian
Publisher:
Publish Date: 2006-10-01
Features: On August 27, 2006, the 23rd session of the Standing Committee of the 10th National People's Congress passed the new Enterprise Bankruptcy Law by a high vote. This draft, which took 10 years to complete, finally became law after two years and three reviews and revisions by the Standing Committee of the National People's Congress. The Enterprise Bankruptcy Law (Trial Implementation) formulated in 1986, which was only applicable to state-owned enterprises, will be abolished on June 1, 2007, when the new law takes effect. The introduction of the new Enterprise Bankruptcy Law is a sign of the gradual maturation of China's market economy and a necessity for deepening the reform of enterprises, especially state-owned enterprises, to align with the economies of developed countries. In recent years, China's market economy has developed rapidly, economic system reform has been continuously deepened, and the reform of state-owned enterprises has been intensified. Mergers, acquisitions, and reorganizations of enterprises have become more frequent, and bankruptcy cases have also increased. The bankruptcy of enterprises, especially the bankruptcy of some large state-owned enterprises, has a broad impact and urgently requires a comprehensive law for regulation. However, the old Enterprise Bankruptcy Law has long been "outdated." The Enterprise Bankruptcy Law (Trial Implementation) promulgated in 1986 was based on the limitations of the socio-economic conditions at the time and was only applicable to state-owned enterprises. To address its shortcomings, the 19th chapter of the Civil Procedure Law promulgated in 1991 stipulated bankruptcy and debt repayment procedures for corporate legal persons other than state-owned enterprises. The Supreme People's Court also promulgated two interpretations in 1991 and 2002, namely, the "Supreme People's Court Opinions on Several Issues Concerning the Implementation of the Enterprise Bankruptcy Law (Trial Implementation) of the People's Republic of China" and the "Supreme People's Court Provisions on Several Issues Concerning the Trial of Enterprise Bankruptcy Cases." These two laws and the relevant provisions of the Supreme People's Court's interpretations played an important role in regulating the bankruptcy behavior of Chinese enterprises and adjudicating bankruptcy cases. However, with the gradual establishment of the socialist market economy system and the deepening of state-owned enterprise reform, some new situations have emerged in China's enterprise bankruptcy: on one hand, some provisions in the original enterprise bankruptcy legislation (such as those on bankruptcy causes) were not conducive to the equal protection of all bankruptcy subjects and were contrary to the requirements of China's continuously improving market economy; on the other hand, the original enterprise bankruptcy legislation provided relatively general provisions on bankruptcy procedures, making it difficult to operate, and lacked corporate rescue procedures such as reorganization, as well as other relevant systems to effectively protect the debtor's property, safeguard the legitimate rights and interests of employees, and ensure the normal progress of the procedures. In addition, the courts have accumulated a wealth of practical experience in adjudicating bankruptcy cases, some of which need to be elevated to law. Therefore, formulating a unified and comprehensive Enterprise Bankruptcy Law has become inevitable. The new Enterprise Bankruptcy Law was born in this context.