deeply intertwined, the cost of distinguishing their assets is prohibitively high, or failing to consolidate would severely undermine creditors ' rights to equitable repayment.
Projecting the Future: Chinese Bankruptcy Law Reforms
Looking ahead to the future, the Chinese bankruptcy law is also in the revision process. It has already been included in the legislative plan of the National People’ s Congress, the highest legislature in China. Several issues could be worth further discussion.
Personal Bankruptcy
China lacks a comprehensive personal bankruptcy law despite growing demand, particularly from SME owners. Starting in 2018, courts in Jiangsu and Zhejiang provinces initiated collective liquidation practices for personal debts, which were later adopted nationwide. In 2021, Shenzhen launched a pilot personal bankruptcy system, establishing a Bankruptcy Administration Office. Despite cultural resistance, the ongoing revision of the Enterprise Bankruptcy Law presents a crucial opportunity to formalize a personal bankruptcy framework.
Prepackaged Reorganization
Though unaddressed in Enterprise Bankruptcy Law, prepackaged reorganizations are increasingly used, with local courts issuing guidelines. However, current practices often deviate from their intended function,
with courts being overly involved or using |
the mechanism to bypass legally mandated |
procedure deadlines. The future revision would |
need to formalize and regulate prepackaged |
reorganizations, |
enhancing |
efficiency |
and |
compliance. |
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Cross-Border Issues
As China’ s Belt and Road Initiative( BRI) expands, cross-border insolvencies are likely to increase. Enhanced legal clarity and alignment with international norms such as UNCITRAL Model Law on Cross-border Insolvency will be essential to address these cases effectively. The 2021 Mainland-Hong Kong crossborder cooperation framework is a notable development. The future revision is expected to establish a comprehensive system to tackle cross-border challenges.
Conclusion
The 2023 revision of the Chinese Company Law represents a significant step forward in modernizing China’ s corporate and bankruptcy frameworks. By strengthening governance standards, enhancing creditor protection, and promoting corporate social responsibilities, the new law lays a robust foundation for the future. As China continues integrating with the global economy, bankruptcy legislation and practices in the next years are poised to reflect high-level international standards. These developments will bolster public confidence in China’ s legal system and ensure its resilience in an increasingly complex global landscape.
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