CHINA'S NEW DRAFT Bankruptcy Law, presented to the National People's Congress for deliberation last summer, is expected to come into effect before the middle of next year.
The legislation will offer much needed reform in an area that has failed to keep pace with the mainland's rapidly growing market economy and the formation of a modern-day and effective credit system.
'The legislation aims to draw together the fragments of bankruptcy law that exist in China and to introduce a system of bankruptcy practice that is largely in accordance with international standards,' said John Marsden, a partner at law firm Johnson Stokes & Master.
At the same time, the new legislation recognises that the mainland is an emerging market with unique considerations.
'You will see in the new legislation, for example, that there is strong protection of employee rights in terms of unpaid wages and remuneration and you can understand that. In China widespread unemployment is clearly not what is wanted,' Mr Marsden said.
The current bankruptcy regime is made up of a patchwork of laws, regulations and policies that often differ in application from province to province and even from company to company, depending on whether the enterprise is state-owned or not. The draft law, by contrast, applies equally to all forms of ownership, including state-owned enterprises, partnerships, sole proprietorships and private enterprises.