Tribunal to handle 'zombie companies'

Guangdong sets up bankruptcy court to hear high number of expected cases

A provincial tribunal for bankruptcy cases was unveiled in the Guangdong High People's Court in Guangzhou on Monday, in a move to handle disputes brought on by "zombie companies" and to accelerate local economic development.

It is the first tribunal established within a provincial high people's court, as Chinese courts give bankruptcy cases greater attention, according to Tan Ling, vice-president of the Guangdong court.

The tribunal will contribute to effectively and legally cleaning up the province's 3,385 zombie companies, which continue to operate even though they have become bankrupt and have been an economic burden for many years, Tan said.

"Judicial work should play its role in pushing economic development and providing a fair and effective environment for the market-oriented economy," she said. "The tribunal will give legal protection as the zombie companies quit the market."

Under provincial policies for mergers or restructuring, some State-owned enterprises have effectively been operating in bankruptcy and will need to be handled through the courts, she said.

"It means the number of bankruptcy disputes filed and heard at the tribunal will face a sharp rise in the near future," she said.

The tribunal will also oversee the liquidations of ailing enterprises and related disputes, she added.

Li Cheng, head of the Guangdong State-owned Assets Supervision and Administrative Commission, applauded the tribunal, saying that his commission plans to help the zombie companies be merged or reshuffled in two to three years.

"Of them, 2,333 will be shut down by the end of this year, and 300 that are operating in a deficit will be bailed out before December," Li said.

Wang Weiguo, a professor specializing in bankruptcy law at China University of Political Science and Law, said that the number of judges hearing such cases must be increased, as the combination of legal and business knowledge will contribute to alleviating bankruptcy-related problems.

"Solving a bankruptcy dispute used to cost a court a lot of time, but after the tribunal is in operation, I think, related cases will be solved efficiently," Wang said.

Since Aug 1, litigants have been able to make an appointment to file a bankruptcy case and search bankruptcy-related legal documents via the Supreme People's Court website.