A draft bankruptcy law was submitted to the 12th meeting of the
Standing Committee of the 10th National People's Congress on
October 24 for its second deliberation. A key component is that
companies going bankrupt would have to honor employees' salaries,
insurance contributions and other due compensation before paying
off creditors.
This revision has been applauded by many members of the Standing
Committee since they say employees are the most seriously affected
when the companies they work for go bankrupt. According to Jia
Zhijie, member of the Standing Committee, it would be a landmark
development.
Zhou Yuqing and other members said employees' rights and
creditors' rights are of unequal importance in bankruptcy cases.
Employees depend on their salaries for a living, but creditors have
a responsibility to realize the risk of their debtors' improper
management leading to insolvency.
Yang Xingfi said such a revision uses a people-centered
principle and would protect disadvantaged groups. It would not only
protect the rights of employees but would also be conducive to
social stability and socialist modernization.
Some members think that salary, social insurance and
compensation should be treated separately. Many employees do not
register for social insurance, or do not pay certain fees mandated
in the social insurance system. Due to this, they believe salaries
and compensation should take priority. However, this would not be
consistent with international practice.
Other controversial aspects that need further discussion include
whether private companies can declare bankruptcy, precise
preconditions for declaring bankruptcy and the qualifications and
responsibilities of people overseeing the process.
Drafting of new bankruptcy laws has taken over a decade,
undergoing many revisions along the way. The draft was submitted to
the Standing Committee of the National People's Congress for its
first deliberation in June this year.
(China.org.cn by Yuan Fang, October 30, 2004)