China enacts first bankruptcy law for private business
(AP)
Updated: 2006-08-28 06:36
China's parliament on Sunday enacted an updated bankruptcy law that
explicitly covers private businesses for the first time, a state news agency
reported.
The law also raises the status of commercial creditors, requiring failed
companies to pay them first instead of workers, who previously had priority, the
Xinhua News Agency said. It said the law will take effect next June 1.
The measure is meant to modernize a 1986 bankruptcy law in a communist system
that relies heavily on private entrepreneurs to create jobs and prosperity.
Previously, Chinese bankruptcy law only mentioned state-owned companies, leading
to uncertainty about how to settle the debts of private businesses that failed.
"All the country's companies and enterprises, whether state-owned or private,
will have to follow a unified corporate bankruptcy law if they founder," Xinhua
said.
Rules based on the 1986 law "are widely regarded as outdated as they fail to
give sufficient protection to creditors and only touch on state-owned
enterprises," Xinhua said.
Officials defended the decision to give creditors priority over employees,
saying it brings China into line with market economies and will reassure foreign
investors.
"The provision is a compromise that aims to protect both creditors and
workers of insolvent enterprises," Xinhua quoted Cheng Siwei, deputy chairman of
the parliament's Standing Committee, as saying.
|
