Precedent needed

Author: | Published: 1 Aug 2007

On June 1 2007, the new Enterprise Bankruptcy Law of the People's Republic of China became effective, representing a big improvement in the rights of secured creditors. The new law was largely introduced to encourage foreign investment and lending into China and is based heavily on the US system of bankruptcy law.

The new law applies to state-owned enterprises and certain other enterprises, but excludes entities such as partnerships.

Secured financing Security for financial obligations may be granted in China, but the law in this area is not highly developed. Since 1995, the granting of security has been governed principally by the Security Law, which provides for the protection of creditors through the use of guarantees, mortgages, pledges, liens, and security deposits. As of October 1 2007, the new Property Law, which contains provisions similar to the Security Law covering mortgages, pledges and liens, will take effect. It is not clear...