China’s New Judicial Interpretation on the Company Law – A Step Toward Systemized Corporate Exit Mechanisms
On May 12, 2008 the Supreme People’s Court promulgated the Interpretation of Some Issues regarding the Application of the PRC Company Law, which became effective on May 19, 2008. The new interpretation provides guidelines on the application of Chapter 10 of the Company Law on dissolution and liquidation of companies incorporated in China, including foreign invested enterprises and domestically owned companies, both limited liability companies and joint stock companies.
Date:
May 2008
Keywords (click to search): [company law liquidation FIEs LLC joint stock]
BACKGROUND
The Supreme People’s Court of the People’s Republic of China promulgated the Interpretation of Some Issues regarding the Application of the PRC Company Law (??????????«??????????»???????(?)) (Judicial Interpretation 2) on May 12, 2008, and it became effective May 19, 2008.
Judicial Interpretation 2 is reported to have originated from a 2001 draft judicial interpretation entitled Provisions on Some Issues regarding the Trial of Dissolution Cases involving Legal Person Enterprises (?????????????????????) (the “Draft Dissolution Provisions”).
The Draft Dissolution Provisions targeted the then commonplace liquidation and dissolution practices in China, and reflected Supreme Court’s efforts to improve the overall legal framework for China’s market economy by shedding more light on enterprise exit mechanisms.
When the PRC Company Law was amended in 2005, the Supreme Court amended the Draft Dissolution Provisions accordingly and formalized them into a judicial interpretation.
The 24 articles of Judicial Interpretation 2 reflect the original Draft Dissolution...
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