Vol 7 (2010) - Issue 5

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China’s Bankruptcy Law after Three Years: The Gaps Between Legislation Expectancy and Practice and the Future Road – Part One

Introduction
The existing bankruptcy law of China (hereinafter referred to as the Law) was promulgated on 27 August 2006 and became effective on 1 June 2007. The Law reflects the most advanced market economy ideology from its style of legislature, structure and contents. A senior attorney in Hong Kong comments that the Law is more advanced in form than the bankruptcy law in Hong Kong, where there are otherwise more developed laws typical of a market economy. What are the real effects of the Law with advanced principles and rules of market economy when implemented in a social and economic transition context? Has judicial practice matched legislation expectation? How to fill the gap between paper law and reality and make the marketoriented law a booster of China's economic transition? Three years have passed since its implementation and it is the right time to review these questions. This article will make an empirical analysis of the gaps between the Law and the reality reflected during its implementation and make suggestions on methods of solvement.
This article is composed of six parts. Part one describes the general bankruptcy regime and its implementation. Parts two, three and four illustrate the implementation of the reorganisation, arrangement and liquidation system under the Law, especially the gap between the expectations of legislation and the practice. Part five, based on the descriptions in part two, part three and part four, further describes the problems in the legislation of administrator of the Law and its impact on the practice. Part six summarises the causes of the gaps mentioned above and predicts the future roads of the Law.

I. The general bankruptcy regime and its implementation
The bankruptcy regime of China is composed of two parts: the Law and judicial interpretations. The former is made by the People's Congress and the latter are made by the Supreme People's Court of PRC (hereinafter referred to as the Supreme Court). In order to facilitate the implementation of the Law, the Supreme Court has released several judicial interpretations. They are: Supreme People's Court Regulation on Law Application of Cases Still Pending upon the Enterprise Bankruptcy Law of People's Republic of China Coming into Effect; Supreme People's Court Regulation on the Appointment of Administrators; Supreme People's Court Regulation on Compensations of Administrators; Supreme People's Court Regulation on Bankruptcy Cases in which the whereabouts of the debtor or its assets are unclear; Supreme People's Court Regulation on Time Limits for Hearing Civil Cases etc. Moreover, the Supreme Court is drafting a comprehensive judicial interpretation on the Law based on the problems accumulated and experience gained during the three year implementation of the Law. The existing draft of this judicial interpretation contains about 300 articles, which is far more than the 136 articles contained in the Law. It is expected to be published within three years. A smaller-sized judicial interpretation directing the insolvency of listed corporations is expected to be issued before this comprehensive one.