Bankruptcy law puts creditors first
28 August 2006
The Standing Committee of the National People's Congress adopted a new corporate bankruptcy law Sunday. The new law, which takes effect June 1, 2007, requires bankrupt enterprises to pay creditors before using any remaining assets to pay laid-off workers. It replaces the Interim Enterprise Bankruptcy Law, which was introduced in 1986 on a test basis and allowed laid-off workers to be paid before creditors. "The new law embodies the notion of putting people first, as it fully considers worker's interests," said Jia Zhijie, a member of the NPC Standing Committee. "At the same time it accords with standard international practice in better protecting lenders' interests." The law will apply to state-owned enterprises, private companies, financial institutions and foreign-invested companies, but makes an exception for around 2,000 ailing state-owned enterprises which can be closed down with the aid of government bailouts and can pay laid-off workers first if they announce bankruptcy before June 2007.
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