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6 China-EU L.J. 1 (2018-2019)

handle is hein.journals/caeulwj6 and id is 1 raw text is: China-EU Law J (2018) 6:1 31 https://doi.org/ 10.1107/s12689-017-0077-z Bankruptcy stigma and the second chance policy: the impact of bankruptcy stigma on business restructurings in China, Europe and the United States Tibor Tajti1 Published online: 15 November 2017 © China-EU School of Law 2017 Abstract This paper deals with a topic of common concern to China, Europe and the United States: the negative effects of bankruptcy stigma on the second chance (fresh start) policy encouraging restructuring of businesses as an alternative to their liquidation. In most Continental European civil law systems, for example, business restructurings are still only aspirations rather than reality. This is to a great extent due to the ubiquity of intense bankruptcy stigma as a consequence of what, for example, creditors as well as the directors and officers of the bankrupt debtor avoid participating in restructuring proceedings. The resulting dominance of liquidations is perceived as a competitive disadvantage both for China and Europe compared to the United States that possesses the top model enshrined in Chapter 11 of the US Bankruptcy Code. It was for these practical reasons that the second chance policy was given clear priority by the European Union as best expressed in the Commis- sion Recommendation of 12 March 2014 on a New Approach to Business Failure and Insolvency. Similar policy shift characterizes the 2007 Enterprise Insolvency Law of the People's Republic of China as visible from Chapter 8 on reorganisation and Chapter 9 on compositions (workouts). While bankruptcy stigma is present also in the United States, its effects are the least biting in this country and are an issue primarily in the context of consumer-bankruptcies. In light of the above, this arti- cle's main claim is that without proper understanding and acknowledging the impact of bankruptcy stigma, hardly could lawmakers' efforts aimed at forging a legal This article is the extended version of the presentation the author delivered at the international conference 'Legal Reform of Market Economy,' organized by the China-EU School of Law in Beijing on 5 Nov 2015. ® Tibor Tajti tajtit@ceu.edu; http://ssrn.com/author=328809 Chair of the International Business Law Program, Legal Studies Department, Central European University (CEU), Nidor Street No. 9, Budapest, Hungary I Springer