Old Version

Improving Bankruptcy, Liquidation System Next Important Step

A recent editorial welcomed the government's new measures to simplify the canceling of registered businesses, but argued they fall short of improving the legal system around them

By Xu Mouquan Updated Jan.10

At a January 2 meeting China’s State Council (its cabinet) at a January 2 meeting said it will simplify all necessary procedures and establish an online cancellation platform to make canceling registered businesses easier, read an editorial in the Shanghai-based financial news portal yicai.com. 
Once registered, a company is likely to have many legal relationships, so the process must address the interests of different parties.  
But cancellations are costly and time-consuming, the editorial read. Data shows that it can take up to seven months and cost tens of thousands yuan. Agencies set the prices. The State Council aims to improve the overall business environment with these measures.  
However, these procedural measures fall short of improving the legal system around them, the editorial said. As part of the next step, the editorial argues the country needs to revise its bankruptcy laws as soon as possible.  
Some stipulations in the 2007 Enterprise Bankruptcy Law are ill-fitted to the current situation, especially at a time when insolvent companies need to be addressed more quickly, it read.  

The other issue is pushing for specialized bankruptcy courts, yicai.com argues. Since bankruptcy cases take a single hearing, this raises the bar for fairness and preciseness. China’s Supreme People’s Court already has required local intermediate courts of provincial capitals and other cities to set up liquidation and bankruptcy courts.