Compliance system needed for enterprise bankruptcies

The Enterprise Bankruptcy Law was considered and adopted by the Standing Committee of the National People’s Congress on 27 August 2006, establishing a market entity withdrawal and rebirth mechanism in legal form for the first time, and filling in the last blank in the legal regime for the market economy. Accordingly, the Enterprise Bankruptcy Law has been seen as a milestone in China’s legal regime for the market economy.

One of the core ideas of the Enterprise Bankruptcy Law is the manager system. The term “manager” means a special entity that is designated or appointed in accordance with the law during a bankruptcy procedure to be responsible for management of the bankruptcy property and handling of bankruptcy matters.

The Enterprise Bankruptcy Law bestows wide-ranging rights on the manager, including undertaking such duties as the review of claims, management and disposal of bankruptcy property, liquidation matters, etc. As enterprise bankruptcy is an intricate and complex legal procedure involving the interests of numerous entities, whether the manager can independently, objectively and impartially handle the bankruptcy matters is the key to ensuring whether the enterprise bankruptcy procedure will operate impartially and efficiently. The establishment of a sound manager compliance system and monitoring mechanism, then, is of great importance.

Jeffrey Yang is a senior partner and Miao Shunjin is a senior associate
with AllBright Law Offices