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What are the insolvency and liquidation procedures under Chinese law?

In China, there are two laws that specifically govern the bankruptcy of enterprises. One is the Bankruptcy Law of the People's Republic of China (1986), which regulates the bankruptcy of state-owned enterprises (SOE). The other is the Civil Procedure Law of the People's Republic of China (1986), which provides regulations in regard to the bankruptcy of all enterprises with legal person status.

Complementing this legislation, companies established under the Company Law will be governed by the Company Law and Civil Procedure Law.

Presently, with the large number of companies (both limited and joint stock) and SOE's undergoing insolvency procedures in China, the Bankruptcy Law (1986) is under review. A new bankruptcy law is expected to be ratified in the coming few years.

In the meantime, to deal with the vast changes in company structures and business environment, the government relies on The Supreme People's Court to pass interpretation on the existing law. These interpretations essentially form the basis of the new bankruptcy laws in China.

The latest judicial interpretation (consisting of 14 articles and due to be released on September 1, 2002) defines certain procedures application of the above two current laws.

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