“PRC Enterprise Bankruptcy Law” by the Standing Committee of the Tenth National People’s Congress of the PRC on the twenty-third meeting of 27 August 2006, adopted in order to regulate bankruptcy process, fairness clearing debts, protection the legitimate rights and interests of creditors and debtors, safeguard the socialist market economic order, so make this law. Implemented on June 1st, 2007. To understand the importance of this new law, only to see it replaced the old bankruptcy law that the Department on the line.
The law at the beginning of China’s economic reforms enacted 20 years ago in all bankruptcy proceedings will be placed on the government dominance. Closed due to bankruptcy because of fear of unemployed workers in state-owned enterprises will lead to social unrest, the old bankruptcy law to be considered in the political focus on more than economic factors. This law will bankrupt the interests of employees placed above the interests of creditors. The private sector in this law or simply not mentioned, so bankruptcy of private enterprises has been no clear law applicable to regulate.
B. The new bankruptcy law of China Implementation of the new bankruptcy law also allows for bankruptcy protection in Beijing for the first opportunity to introduce the concept of China. Section 73 of the Act , based on the companies to make filing for bankruptcy reorganization after rebirth , having to settle onto the closed roads , the bankruptcy court has the power to approve the enterprise under the supervision of the Manager to manage their property and business affairs . But this does not mean that the new bankruptcy law will ever be perfect.
Some vulnerabilities could cause the politicians to continue to intervene in corporate bankruptcy matters. For example, although the bankruptcy was appointed to the charge of corporate managers may be professionals , but they have the right to appoint judges who are often not professionals . As the income level managers are more likely to be determined by the court rather than the creditor , so the judges and their friends in the local government will get a more interventionist bankruptcy matters convenience.
But the new bankruptcy law is still an important step in the right direction , particularly with regard to the restructuring of China’s financial system is concerned . China ‘s financial system is still plagued by a large number of bad debts caused by bankruptcy . According to the American Institute for International Economics in Washington (Institute for International Economics) recently estimated that China ‘s total bad debt equivalent to 162 percent of the country ‘s GDP .
If the Chinese banking sector in order to withstand the downturn in economic growth in the test , we must solve the problem of bad debts . C. The Bankruptcy procedures So far, corporate bankruptcy proceedings have been so vague that China’s four state-owned banks and some small shareholders who make mismanaged liquidation bankruptcy regarding prohibitive. Although Chinese banks to obtain a controlling stake in many companies through debt-equity swap transaction, the bank intends to come forward but there is no direct management of these companies.
These banks are not prepared to judge the credit risk of the private sector in many cases they still tend to support local governments and state-owned or private lending. So the new bankruptcy law specifically develop the terms for financial regulatory agencies to apply to court for bankruptcy reorganization or liquidation of financial institutions. Specific bankruptcy processes as Appendix 1,2,3,4. D. The order of pay off When a company enters bankruptcy proceedings, liquidation order, how many creditors arrangement “PRC Enterprise Bankruptcy Law ” on page 113 is such a requirement: (a) the bankrupt owed ??
wages and health care, disability benefits, pension costs, owed to workers should be included in the basic personal accounts pension insurance, basic medical insurance costs, as well as legal and administrative regulations should be paid to workers compensation; (b) the payment of the bankrupt, except as provided in the preceding paragraph of the social insurance and bankrupt taxes owed; (c) ordinary. Meanwhile, when not enough to pay off the settlement requires the same order, in accordance with proportional distribution.
In the famous Sanlu bankruptcy, those victims of the Sanlu poisonous milk powder by consumers unable to obtain compensation Sanlu; Sanlu milk powder manufactured toxic managers and employees, but it can legitimately entitled to compensation. According to media reports, 2008 on November 20, Shijiazhuang court ruling, ending the Sanlu Group’s bankruptcy proceedings. Ruling shows that Sanlu settle for ordinary claims rate is zero. This means that the Sanlu baby has been unable to assume any compensation for the stones.
Thousands of victims of stones by the Sanlu baby can not get compensation, but a variety of wages and social security costs Sanlu internal staff has obtained payment. Such compensation is undoubtedly unjust in order. Enterprise Bankruptcy Law, the reason must be, but in order to protect the interests of corporate creditors. If companies can not repay the debt due afloat, it will seriously damage the interests of existing creditors, will also generate more potential creditors. Therefore, it becomes a choice for enterprise bankruptcy and creditors have undertaken.
However, according to existing compensation order, victims of corporate bankruptcy is precisely the relationship between man and external business unrelated to the relationship between man and the internal debt that led to corporate bankruptcies has been to maximize protection. Such a system is designed not so much to protect the interests of creditors, rather, bankruptcy procedures have become a legitimate way to protect the interests of the enterprise. The victim did not wish to be compensated is not it? Hope is still there, the government how to do.
Under the “Food Sanitation Law”, “major national food safety emergency plan,” the responsible units and persons responsible for causing major food safety incidents should pay compensation to victims in accordance with relevant regulations. State enterprises should not only be related fines, but also on the production and operation does not meet the hygiene standards of food, resulting in serious accident or other serious food poisoning, causing serious harm to human health, shall be held criminally responsible.
Therefore appealed to the relevant state departments to protect the interests of consumers as a top priority, to take emergency measures for food safety, temporary seizure of the underlying assets freeze Sanlu Group Co. , the first guarantee compensation for victims. ‘Seen that the current order of business of the estate is settled neither serve to protect the interests of creditors of the enterprise, while not conducive to disclose adverse internal relationship management information to the public.
Is to change the situation of the time, otherwise, the “Bankruptcy Law” Article 1 of the term “fair clearing debts, protect the legitimate rights and interests of creditors and debtors,” the goal to ultimately be reduced to “protect the enterprise the legitimate rights and interests of workers, “and this is undoubtedly contrary to the goal of bankruptcy law. ’1 E. Chinese Enterprise Bankruptcy rate analysis According to the statistics: the average life expectancy of Chinese private enterprises is only 2.9 years, every year about one million Chinese private enterprise bankruptcy, 60 percent of enterprises will go bankrupt within five years, 85 percent of enterprises will die out in 10 years, can survive for more than 3 years only 10% of companies, the average life expectancy of large enterprise groups only 7. 8 years.
Of which 40% of the enterprises in the start-up stage on bankruptcy. In China there are daily 2740 business failures, there are 114 average hourly bankruptcy, there are two companies go bankrupt every minute.
The average life expectancy is 30 years of Japanese companies, we are 10 times; U. S. corporate average life expectancy is 40 years, as China’s 13 times. For details of Chinese Enterprise Bankruptcy , see Appendix 5. F. Personal Bankruptcy With the rapid development of these issues in consumer credit, investment management and personal ability bankruptcy surfaced , this has not been written into this new enterprise bankruptcy law , but lawmakers and experts remains controversial. Scope problem is an old bankruptcy law , I still insist that the appropriate expansion of the scope of some appropriate.
Enterprise Bankruptcy Law does not apply only to corporate entities, I think it can be extended to non- corporate entities, such as private companies , partnerships , personal business , as well as individual businesses and even individuals . 2 Although the debtor and personal business investor housing, cars and other consumer loans are mostly high- income groups , but some people and operating income is not stable, once the economic fluctuations , the phenomenon is likely to lead to insolvency . If
there is no clear way to dispose of easily lead to social instability. ‘However, many experts pointed out that the establishment of personal bankruptcy system faces considerable obstacles and lacking. Personal bankruptcy requires a sound property rights system , in order to define the scope of the estate and bankruptcy claims , but China is now the property rights system is not perfect ; addition, because of the personal credit system is not perfect , the legislature might worry some people use bankruptcy program to escape debt.
Although there are some experts on personal bankruptcy cautious , but if not to establish personal bankruptcy a few years ago , people still argue , now the main question is, what time to establish more appropriate. ’3 United States and other countries and regions on the basis of a more complete credit system and property rights regime established on personal bankruptcy system , their history and development of legislative experience is worth learning from. G. Assumptions
Any legislation must go through a certain distance from the legislative to achieve legal goals, the complexity of the real world is by no means a simple enactments will be able to cover. Enterprises are facing bankruptcy settlement, when the reorganization or liquidation decision, involving different stakeholders interests reconfiguration, plus incompleteness of the market and the incompleteness of the law, it will exacerbate the challenge of implementing the bankruptcy law.
In particular, legislation has not been out of the limitations of thinking should be broad rather than narrow, increasing the incompleteness of the law. Reform is a progressive process. Not because of the legal system of innovation through the new bankruptcy law and wrapped step before, we need to continue in-depth research, and economic development to keep pace.
Research should continue to focus on the bankruptcy legislation the following questions: 1, Allow and encourage strategic bankruptcy of debtors 2, consider the natural Bankruptcy Law 3, Insolvency regime of natural disasters 4, Encourage institutional innovation, the creation of claims trading market4 H. Conclusions New Institutional Economics believes that the legal system is one of the endogenous variables of economic growth. In-depth development of the market economy, the role requires full adjustment Bankruptcy Law on the economy. China’s economy continues to grow rapidly, while inflation has encountered blocking, while the world has entered the current period of economic decline development process, which will inevitably lead to an increase in bankruptcies.
Recognize the phenomenon of economic attributes of bankruptcy, according to its economic substance and economic characteristics of the countries actively learn and absorb the experience and proven results of the reform of bankruptcy legislation, formulation, development, and improve relevant laws and regulations of bankruptcy, which is a necessary requirement of the market economy, but also necessary components and important factor in promoting social stability and harmonious development of the rule of law.