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New court tribunals speed up processing of bankruptcies

By CAO YIN | China Daily | Updated: 2017-09-12 08:31

China has made progress in fighting so-called zombie companies and in handling bankruptcy disputes over the past few years, especially since an online platform was launched and more specialized tribunals were added, according to the country's top court.

Zombie companies are those that are heavily in debt or that rely on bailouts to survive.

The platform, set up by the Supreme People's Court in August last year, is used to collect information about such companies across the country, offer legal guidance for enterprises and help judges deal with disputes brought by bankruptcy.

"Companies that encounter financial difficulties or are on the verge of shutdown can apply for bankruptcy on the platform, which will speed up procedures," He Xiaorong, chief judge of the top court's No 2 Civil Tribunal, said in a progress review last month.

"The move is to ensure that zombie companies can both enter and quit the market in a legal way," he said, adding that the platform has also improved efficiency in handling bankruptcy cases.

In 2016, Chinese courts heard 5,665 bankruptcy disputes, up 53.8 percent year-on-year. Of those, 3,602 were concluded, up 60.6 percent year-on-year, according to the top court.

From January to July, courts nationwide settled 1,923 bankruptcy cases, up 28 percent year-on-year. "The platform has helped courts settle bankruptcies online, and made our work more technology friendly," He said.

As of July 31, the platform has been visited more than 51.4 million times, with 17,051 registrants and 17,647 disclosed verdicts, the top court said.

On top of improving courts' efficiency, the public platform can also attract financial aid for enterprises that need to be restructured, He said.

In October 2015, for example, an electronics company in Shenzhen, Guangdong province, announced it had stopped operations due to a break in its capital chain. It applied for bankruptcy with the Shenzhen Intermediate People's Court.

Before hearing the case, the court first calmed about 4,000 employees, and the subsequent trial caught the attention of other enterprises, a statement from the court said.

In April, the court approved a restructuring plan for the company after it received a financial infusion from other enterprises. The move helped the company recover, the court said.

To more effectively process the rapidly increasing number of bankruptcy cases, additional tribunals have been established. There are 90 currently, up from just five in 2015, the top court said.

Three of the tribunals were created under provincial high courts, while the rest were under intermediate, district or county courts.

Tan Ling, vice-president of the High People's Court in Guangdong, said: "Judicial work should play a role in pushing economic development and providing a fair and effective environment for the market-oriented economy."

She added that the tribunals would provide legal protections as zombie companies quit the market.

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