Applicability of the World Bank Reports on Doing Business for the case of bankruptcy in China

1
Applicability of the World Bank Reports on Doing
Business for the case of bankruptcy in China

• by
• Mary Ip
• University of New South Wales
• University of Sydney

2
Reports propositions for an efficient closure of
business

• Appropriate institutions
• Time, cost and recovery rate
• Good regulatory environment
• Provision of expertise
• Judiciary
• Specialised courts
• Administrator
• Involving stakeholders
• Creditors
• Employees
• Various bankruptcy mechanisms
• Liquidation
• Reorganisation
• One size fits all approach (?)

3
Appropriate institutions time, cost and
recovery rate

• Time
• Statutory time frame is approximately 9 months
  and 10 days
• Cost 18 - 22
• Recovery 35.2 - 31.5
• GDP 10.1 - 10.9

4
Appropriate institutions - Good regulatory
environment

• Reports claim-
• Poor and civil law countries regulated the most
• inconsistent with the case of Australia
• Cumbersome regulation ? low productivity
• questionable in Chinese case

5
Appropriate institutions - Good regulatory
environment

• The quality of business regulation prosperity
• The New Bankruptcy Law in China 2006
• - Shortened the statutory timeframe and
  simplified the process
• - Administrator individual vs team
• - Restrictive measures
• Appeal 10 days
• Court take over creditors meeting in decision
  making
• Frequency of application
• 1986 Law
• 2006 Law

6
Provision of expertise

• Experienced judges
• - Chinese judiciary
• young profession
• limited exposure
• independence i) supervision ii) personal
  responsibility
• Specialised courts
• Shenzhen specialised court
• Administrators
• - Article 24

7
Involving stakeholders - creditors

• 2004 and 2006 Reports
• - Court power ? corruption
• - Creditors power ? administrator
• China
• Collective approach

8
Involving stakeholders - creditors

• 2004 and 2006 Reports
• Creditors power recovery rate
• China
• Secured creditors priority
• Creditors committee
• Registration system ?
• Appraisal system ?
• Local protectionism
• Fraudulent bankruptcy

9
Involving stakeholders - employees

• 2004 and 2006 Reports
• Creditors
• China
• Employees
• Social and welfare payment
• Workers right court (Article 6)
• Workers role in bankruptcy (Articles 59 67)

10
Various bankruptcy mechanisms

• 2006 Report
• Foreclosures and liquidations ?
• Reorganisation ?
• China
• Reorganisation ?
• Bankruptcy cannot afford and aftermath
• Reorganisation companys asset worth more
• -- mutual benefit
• -- fair and equitable for
  all stakeholders

11
Conclusion

• The World Bank Reports on Doing Business are
  collaborative effort
• Recommendations sweeping-
• Cumbersome regulation ? low productivity ?
• Application rate ? legislation efficiency ?
• Expand court powers ? desired goal ?
• Reorganisation ? bad mechanism ?
• Judges business experience ? recovery rate ?

12
Conclusion (cont)

• One size fits all ?countries have varied and
  distinctive circumstances
• Adapting Western ideas into a Chinese framework
  (????)
• New Chinese Bankruptcy Law timely example to
  test the applicability of the recommendations in
  the three Reports

13
Conclusion (cont)

• Chinese bankruptcy regime require infrastructural
  changes in
• law
• social welfare
• economic

14
2006 Shenzhen Intermediate court
15
2006 Joint legal professional program between
Australia and China
16
Conclusion (cont)

• Pension system undergoing major change
• Property law passed in March 2007
• Labour contract law was passed last Friday
• Adaptation of foreign experience needs
  modification

17
Acknowledgment

• Judith
• Vivienne