Founder, Supreme Peoples Court Monitor

Susan Finder

Founder

Supreme Peoples Court Monitor

Thematic (Sector/Industry)

<p>The Supreme People's Court (SPC), which leads the Chinese courts, is promoting the use of bankruptcy (insolvency) law to deal with zombie enterprises, on orders of the central authorities.  The number of bankruptcy cases that the Chinese courts accepted in 2015 was greater than 2014, and 2016 cases will likely be even more numerous, but are minute in comparison to insolvent companies. Several provinces are taking the lead.  Judges and the bankruptcy profession have discovered:</p><ul><li> local governments often oppose local companies going into bankruptcy;</li><li>bankruptcy legislation is inadequate, particularly where practical details are concerned;</li><li> the role of bankruptcy administrator is crucial to making bankruptcy work, but the rules to guide the administrator are unclear.  </li></ul><p>The SPC is promoting the courts as hospitals for companies rather than morgues, stressing bankruptcy reorganizations.   This article describes some of the technical and political obstacles that stand in the way. It also highlights planned and contemplated reforms.</p>

The Supreme People's Court (SPC), which leads the Chinese courts, is promoting the use of bankruptcy (insolvency) law to deal with zombie enterprises, on orders of the central authorities.  The number of bankruptcy cases that the Chinese courts accepted in 2015 was greater than 2014, and 2016 cases will likely be even more numerous, but are minute in comparison to insolvent companies. Several provinces are taking the lead.  Judges and the bankruptcy profession have discovered: local governments often oppose local companies going into bankruptcy;bankruptcy legislation is inadequate, particularly where practical details are concerned; the role of bankruptcy administrator is crucial to making bankruptcy work, but the rules to guide the administrator are unclear.  The SPC is promoting the courts as hospitals for companies rather than morgues, stressing bankruptcy reorganizations.   This article describes some of the technical and political obstacles that stand in the way. It also highlights planned and contemplated reforms.

Chinese Courts to Cure Zombie Enterprises