New Bankruptcy Law Is Proposed in China
China's national legislature will begin reviewing proposed bankruptcy legislation that for the first time would set market-based ground rules for state-run and privately held Chinese companies to declare insolvency.
A draft of the long-awaited Business Bankruptcy Law was submitted to the National People's Congress standing committee yesterday, and could be passed by early 2005, drafters of the bill say. Generally, the Chinese legislature rubber-stamps bills that are submitted to it.
The proposed legislation, a cornerstone in China's effort to build a market economy, would allow failing state-run enterprises to go bankrupt according to market principles and stipulate guidelines for bankruptcies in the nonstate sector. Existing law addresses only state-sector bankruptcies and puts the interests of workers, not creditors, first.
"It's a substantial step forward," said Lester Ross, a partner at law firm Wilmer Cutler Pickering LLP in Beijing. He says the legislation will inject more certainty into the bankruptcy process, making it easier for companies to declare insolvency and restructure, as well as to sell or acquire distressed assets.
Although the legislation's biggest impact will be on Chinese companies, foreign investors also could benefit. International accounting and law firms could find more opportunities to assist companies liquidating assets or looking to buy them. Increased legal certainty could make distressed assets more attractive to potential foreign buyers.
The absence of a modern bankruptcy law has made it tough for failing companies, especially those in the state sector, to shutter their operations. China's existing bankruptcy law for state-owned companies was introduced in 1986 and reflects the influence of Beijing's former planned economy. Now more than two decades of market reforms have given birth to a range of types of businesses, including private and joint-venture companies.
Under current law, an insolvent company must seek official approval before filing for bankruptcy, and the state is obliged to help its employees find new jobs. Creditors have little say in the process and often are treated equally, without consideration for special circumstances. The existing law is "more debtor-friendly than creditor-friendly," says Michael Harris, a partner at PricewaterhouseCoopers LLP in Beijing.
The proposed law, in contrast, would cover all legal entities, including private companies and financial institutions. It would let companies initiate bankruptcy proceedings without government permission, and would require that they make their first priority the repayment of creditors, not to find new jobs for their workers. The law also would give creditors more power in the process, allowing them to intervene in any developments that hurt their interests, said Wang Weiguo, a professor at China University of Politics and Law who took part in the drafting.
The legislation also is expected to address cross-border insolvencies, such as foreign-invested joint-venture companies or those that involve foreign creditors or assets located outside of China.
Drafting of the bankruptcy law has dragged on for a decade, in part because of what the authors describe as misplaced concerns that a revision could trigger closures of many state enterprises, massive layoffs and social unrest. Participant Li Shuguang, a vice dean at the China University of Politics and Law, says many state-run enterprises already are going bankrupt. "The bankruptcy law isn't the equivalent of an obituary law," he said. "It also opens the door to reorganization."
Between 1994 and 2002, Beijing initiated 3,080 bankruptcy cases, involving the writing-off of nearly 200 billion yuan ($24.16 billion) in bad loans and the re-employment of more than five million workers. The State-owned Assets Supervision and Administration Commission, the top regulator of the state sector, has estimated that more than 2,000 state enterprises could declare bankruptcy during the next five years, involving up to 240 billion yuan in nonperforming loans.
Some critics argue that the legislation doesn't go far enough. They say the new law should also cover personal bankruptcies, as increasing numbers of Chinese consumers borrow to buy everything from home electronics to houses, then run into difficulty repaying their loans. Another concern is whether China has enough qualified administrators to manage assets under bankruptcy protection. Under the legislation, the court would appoint an administrator, such as a law or accounting firm, that would require approval by the creditors committee. The bill doesn't specify whether the administrator must be a Chinese institution, but "both the number and quality of [such domestic] institutions are far from enough to fulfill the work of managing bankruptcy," says Mr. Wang, the draft participant.
Others worry that Chinese courts' lack of experience in dealing with insolvency cases and local favortism could undermine effective implementation of the law. Under the legislation, any cases would have to be adjudicated in a court in the debtor's domicile, where sympathy could run strong for the insolvent company and its workers. "A great deal depends on how the law is implemented, especially in regard to the judicial process," says Mr. Ross of Wilmer Cutler Pickering. "China's judicial system is ill-equipped to handle such complex matters."
中国新破产法草案姗姗来迟
中国国家立法机构将开始审议新的破产法草案，新法案将首次为中国国有和私营企业宣告破产设立市场化的基本准则。
人们期待已久的企业破产法草案于昨日提交全国人民代表大会(National People's Congress)常委会审议。草案拟定者说，该法案有望在2005年初获得通过。一般说来，提交给人大常委会的议案都会获准。
破产法草案是中国建立市场经济体制的一个基石，它将允许经营不善的国有企业依照市场准则进入破产程序，同时还制定出了非国有企业破产的指导原则。而现有破产法针对的只是国有公司的破产问题，首先保障的是员工而非债权人的利益。
律师事务所Wilmer Cutler Pickering LLP驻北京的合伙人罗斯(Lester Ross)说，这是一项重要举措。新法将使中国的企业破产程序更加明晰，使公司更容易宣布破产和重组，出售或收购不良资产的过程也将更简单。
虽然受新破产法影响最大的是中国公司，但外国投资者也有望从中受益。国际会计师和律师事务所可能会找到更多机会，帮助企业清偿资产或寻求买家。而法律透明度的提高也会增强不良资产对潜在外国买家的吸引力。
缺乏一部现代破产法使经营不善的公司、尤其是国有企业难以关闭其业务。中国现有这部针对国有公司的破产法是1986年颁布的，其中留有中国早先计划经济的痕迹。如今，20多年的市场改革催生出一大批各种类型的企业，包括私营和合资企业。
根据现有破产法，一家企业在申请破产前须经政府批准，并且政府必须要帮助企业员工找到新的工作。债权人在企业破产过程中几乎没有发言权，常常被同等对待，而不考虑特殊情况。普华永道(PricewaterhouseCoopers LLP)驻北京的合伙人哈里斯(Michael Harris)说，现有法律更有利于债务人，而不是债权人。
与之相反，新法草案将覆盖所有法律实体，私营公司和金融机构等也将纳入其中。它将允许企业自己启动破产程序，而无需报政府批准，此外破产企业的首要任务是偿付欠债权人的债务，而不是为员工寻找出路。
参与起草破产法的中国政法大学(China University of Politics and Law)教授王卫国说，新法案还将在破产程序中赋予债权人更大权力，允许他们干预任何损害其利益的举动。
预计新法案还将对跨境破产问题作出规定，如外商投资的合资公司或那些涉及外国债权人或境外资产的破产案。
新破产法的起草历经十年的波折，据法案起草者们说，这是因为其间出现了一些担心，比如新法出台可能会导致许多国有企业关停，大量人员失业，造成社会安全隐患。破产法起草小组成员、中国政法大学研究生院副院长李曙光说，破产法并不等同于死亡法，它还为企业重组打开大门。
在1994至2002年间，中国实施政策性破产案3,080个，涉及核销银行呆坏账准备金近2,000亿元（241.6亿美元），安置员工逾500万人。国务院国有资产监督管理委员会( State-owned Assets Supervision and Administration Commission)估计，在今后五年中可能有超过2,000家国有企业宣告破产，涉及不良贷款人民币2,400亿元。
一些批评人士指出，新法并不完备，还应将个人破产程序覆盖进来。如今，越来越多的中国消费者通过借款购买家用电器、住房等各类商品，但最终却无力偿还贷款。人们的另一担忧是，中国是否拥有足够多称职的机构来管理处于破产保护下的资产。根据新法草案，法院将指定一个管理人，如律师或会计师事务所，这将需要获得债权人委员会的认可。草案没有明确说明管理人是否必须是一家中国机构，但王卫国说，目前这类国内机构的数量和品质都远不足以完成管理破产资产的工作。
其他人士担心，中国法院在处理破产案上缺乏经验，而且地方保护主义风气盛行，这些因素可能损害新法的有效实施。草案规定，破产案将由债务人属地法院进行判决，而对当地破产企业及其员工的高度同情可能影响判决结果。
Wilmer Cutler Pickering的罗斯说，这在很大程度上取决于法律如何实施，尤其是在司法程序方面。中国的司法体系还不健全，无法处理如此错综复杂的事务。
