The new regulations would better protect the rights of employees of bankrupt businesses and prevent debtors from evading debts by claiming bankruptcy, said Liu Guoguang, vice president of the Supreme People's Court.

According to the new regulations, employees of bankrupt companies are the preferred creditors in the process of liquidating company debts. Employees' salaries and financial compensation due should be treated as top priority, followed by government taxation and creditors' rights.

By making such stipulations, the regulations embody the principle of protecting ordinary workers which will play a positive role in maintaining social stability, Li said at a news briefing.

The regulations, to be implemented as of Sept. 1, also stipulate that people suspected of making fake bankruptcy claims or found illegally transferring property before filing for bankruptcy shall be dealt with by relevant government departments according to law.

The regulations also clarify issues including tightening procedures in bankruptcy cases, enhancing supervision over the trial of such cases, and improving property distribution measures.

This is the second time that the Supreme People's Courts has presented an overall and systematic interpretation of the law on bankruptcy since it was formally enacted in 1988.

China has seen increasing bankruptcy lawsuits since the 1990s. From 1990 to 1997, Chinese courts at various levels dealt with a total of 16,100 lawsuits on bankruptcy.

Adopted in 1988, China's corporate bankruptcy law could not meet the changing situation and did not reflect judicial developments in the field with the introduction of the market economy, Li said.

(China Daily August 2, 2002)