City forms "zombie killer" mechanism
Where do enterprises go to die? In China, many enterprises simply fail to die and live on as mere husks of their former selves. These "zombie enterprises" have played central roles in many prominent frauds and scams nationwide.
On Wednesday, the city market watchdog and Shanghai Higher People's Court established a mechanism to try break the bottleneck created by dissolution of zombie enterprises.
Zombie companies often lack account books and other relevant documents because they have not conducted business for a long time. Their former staff and legal persons can be hard, if not impossible, to trace. This lack of documentation means their business registrations cannot be canceled and their legal entity qualifications remain.
Under the new mechanism, liquidation decisions issued by courts will be used to apply for cancellation, according to the Shanghai Administration for Market Regulation.
"The mechanism will improve the 'quit' system for market entities and improve the business environment," said Chen Xuejun, director of the administration.
In 2018, courts in Shanghai received 497 cases regarding enterprise bankruptcy and mandatory liquidation, a surge of 227 percent from the previous year.
"Zombie enterprises are often made use of by criminals, posing a variety of hazards," said Chen Meng, deputy head of the court.