Chinese Bankruptcy Law
As more privately owned enterprises become established in the People's Republic of China, the Chinese government has subsequently introduced bankruptcy laws in order to protect businesses that are subject to financial hardship. Such laws are designed to reorganize China as a market-oriented country.
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Before the Bankruptcy Law
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Before 2007, only state-owned enterprises (SOE) were able to claim relief from creditors when faced with financial problems. The Chinese government would often bail out SOEs with extra funding when they were facing insolvency, according to Forbes.
Implementation
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According to Forbes, China's first bankruptcy law was introduced in 2007. It was modeled around America's Chapter 11 and gave insolvent companies the ability to stay in business while they reorganize and pay creditors. It also allowed foreign investors the right to register for insolvency in case of insolvency.
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Process
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Much like U.S. bankruptcy proceedings, an administrator (such as a company lawyer or accountant) is appointed to help creditors and assist with bankruptcy proceedings. In addition, according to Chapter 10 of the bankruptcy law, employees within the insolvent company are given priority of payment over creditors.
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References
- Photo Credit china image by Luisafer from Fotolia.com
