Financial supervision institutions could apply for bankruptcy for financial institutions in solvency, under a draft Corporate Bankruptcy Law in front of China's legislatures.

Under certain circumstances, the financial supervision institutions could also apply to the court for suspension of the bankruptcy process of the financial institutions, under the proposed law.

To make special regulation on the bankruptcy of financial institutions in China's Corporate Bankruptcy Law marks that China began to standardize the bankruptcy of financial institutions on the legal level, said experts in law.

According to the draft, China's financial supervision institution under the State Council could apply to the people's courts for reshuffle and bankruptcy of financial institutions including commercial banks, insurance and securities companies when they cannot pay off debts due or meet solvency.

This is the third time for the draft to be put in front of the legislatures.

Jiang Qiangui, deputy head of the legal affairs committee of the National People's Congress, said to make special regulations for bankruptcy of financial institutions in the Corporate Bankruptcy Law is proposed during the second discussion of the draft by the legislature.

According to the original draft, application for bankruptcy could only be proposed by debtors or creditors. However, as for financial institutions in insolvency, it is necessary to allow financial supervision institutions to apply for bankruptcy instead of them to prevent further losses when the companies refused to make the application.

To prevent creditors of financial institution in the proceedings of bankruptcy to preempt assets before the supervision institutions to perform takeover or trusteeship, the financial supervision institutions should be empowered to apply for suspension of the bankruptcy process.

Bankruptcy laws have been slow to take effect in China, but laws on state-run companies took effect in 1986 without making any particular provisions on bankruptcy of financial institutions.

By the end of last year, China closed down 3,658 projects through policy way. Beijing, Shanghai, and the provinces of Jiangsu, Zhejiang and Fujian has stopped bankruptcy through policy way and turned to perform bankruptcy of companies or institutions according to law.

Source: Xinhua