Vanderbilt Journal of Transnational Law


Henry R. Zheng

First Page



Art. 1. This law is enacted to meet the need for development of the planned socialist commodity economy and for economic reform, to promote the independence of business management of the enterprises under the ownership by the whole people, to strengthen the system of economic responsibility and democratic management, to improve business management and economic performance, and to protect the lawful rights and interests of debtors and creditors. Art. 2. This law applies to enterprises under the ownership of the whole people.

Art. 3. Enterprises that sustain serious loss due to inappropriate management and that are unable to pay off debts that mature will be declared bankrupt in accordance with the provisions of this law. Notwithstanding the petition for declaration of bankruptcy by creditors, an enterprise will not be declared bankrupt if there is one of the following:(i) the enterprise is one which is engaged in public utility or is of great significance to the national interest and people's livelihood, and for which the pertinent departments of government have provided funds or other assistance to pay the debts; (ii) the enterprise is one that has obtained a guarantee and has paid its debts within six months from the date when the petition for declaration of bankruptcy is filed. Notwithstanding the petition for declaration of bankruptcy by creditors, the bankruptcy proceedings will be suspended where the competent department petitions for reorganization and a conciliation agreement is reached between the enterprise and the meeting of the creditors.

Art. 4. The State will appropriately arrange, through various channels, for the employees of bankrupt enterprises to have new employment, and will ensure that they receive basic living necessities prior to their new employment. The State Council will formulate specific methods separately.

Art. 5. The jurisdiction of bankrupt cases is vested with the People's Court of the place where the debtor is situated.

Art. 6. Where this law fails to provide for applicable procedures, the provisions governing civil procedures will apply to the procedures for bankruptcy cases.