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)
