The Conceptual Structure of China’s New Corporate Bankruptcy Law

Abstract

The passage of China’s new Enterprise Bankruptcy Law on 27 August 2006 stands as a landmark in the legislative history of China’s reform efforts in the area of economic law. This legislation was first put onto the national legislative program in China in 1994, and numerous drafts were then produced prior to the eventual enactment of the 2006 Law by the National People’s Congress of the People’s Republic of China (PRC). Not only has the Law had a lengthy legislative history, it was also one of the last remaining building blocks in the framework of China’s economic laws and now sits beside other important new PRC economic and civil laws, such as the Contract Law, the Company Law, the Securities Law, the Anti-Monopoly Law and the Property Law. This paper discusses key legal principles that are reflected in this Law and compares these with similar principles that can be found in other advanced legal systems and in international guidelines. The five primary principles are: (i) Providing a legal procedure for the regulation of enterprise bankruptcy; (ii) Ensuring the fair settlement of claims and debts in regard to the enterprise; (iii) Protecting the lawful interests of creditors; (iv) Protecting the lawful interests of debtors; and (v) Maintaining an orderly (socialist) market economy. These principles are supplemented five second order principles and a number of implied principles. The implementation of these principles in China’s new Bankruptcy Law will now be the next major challenge facing the development of this area of law in China.