Study On The Transmutation Of Insolvency Repayment System During The Late Qing Dynasty To The Republic Of China

The core essence of insolvency is the redistribution of liabilities and benefits between debtors and creditors,as known as insolvency repayment.During the late Qing Dynasty to the Republic of China,the modern insolvency legal system was able to be transformed.In this process,changes of the distribution of liabilities and benefits in insolvency cases arose.The liabilities of debtors tend to be reduced,and the distribution of benefits among creditors tend to be fair.How and why did these changes occur? What are the respective performances of the insolvency legal system,insolvency customs,and insolvency judicial practice during this period? How should we view the relationship between transplantation of Western insolvency laws and local insolvency laws or customs?What experience can the transmutation of modern insolvency system provide for the improvement of current insolvency laws? Along the main line of “dynamic balance of interests”,with the historical data analysis and comparative research methods,and on the basis of combing the historical transmutation process of insolvency system in the late Qing Dynasty and the Republic of China,this article attempts to answer the above questions.From the middle of the Qing Dynasty,in order to solve the problem of Yahang's arrears with merchants' debts,the “Regulation of Debt Collection of Yahang” was introduced on the basis of “Deception Law” and “Private Debt Law” in the traditional criminal law,which can be regarded as the bud of insolvency legal system in Qing Dynasty.In the late Qing Dynasty,in order to stem the insolvency of banking houses,which seriously disrupted the economic and social order,the Qing government formulated the “Regulation of Beijing banking houses” on the basis of the “Regulation of Debt Collection of Yahang”.This regulation,however,has extended its application to all provinces and professions,and in fact became the official insolvency law in the late Qing Dynasty.The common feature of the two regulations above,is that they both stipulate the debtor's full repayment responsibility and criminal responsibility when he is unable to repay the debt.Also,the methods of how to distribute the debtor's property are not involved,that is,a collective debt enforcement system has not yet been formed.In the middle of the Qing Dynasty and before,the debt repayment system with penalties as the main regulatory method was effective,but in the late Qing Dynasty,in the process of the expanded and more inseparable market economy,the punitive “Regulation of Beijing banking houses” went against with the direction of social changes.The result was that it could neither provide solutions to the increasing number of insolvency debt cases,nor achieve its purpose of curbing insolvency.The changes in legal system began with the Insolvency Law in 1906.Driven by the policy of protecting merchants and commercial warfare and spurred by the unfair treatment between Chinese and Foreign Citizens in insolvency cases,it became the pursuit of the commercial legislature to formulate an insolvency law that conformed to the world trend and conductive to integrate into the world market.By transplanting from Western insolvency laws and fully absorbing native business customs,the Insolvency Law of 1906 initially establishes general procedures for insolvency and debt repayment.It not only abandons the punitive principle to the debtor,but also limits the scope of insolvency property,establishes the debt relief and other debtor protection tendencies.It also changes the previous practice of determining the order of repayment with the identity of the creditor,and establishes the order of property distribution based on collective claims with the nature of creditor's rights.By examining the practice of insolvency and debt repayment in the late Qing Dynasty,we can find that the change in insolvency customs is much earlier than that in legal system.As the government in traditional society adopted a laissez-faire attitude towards pure debt disputes,although the law stipulates guilty of non-payment of debt,most debt disputes still return to private mediation or compromise.In this relatively loose environment,the insolvency customs for the purpose of resolving debt disputes have been formed among business people,in which nonpunishment of debtors,collective claims and fair apportionment among creditors have all been equipped with modern insolvency laws.As a result,even that the Insolvency Law of 1906 was quickly shelved,many of its principles began to be used more and moreon the contrary.In the early period of the Republic of China,the achievements of insolvency legal system are not significant,therefore,customs and precedents play the role to deepen and adjust the distribution of liability and benefits in insolvency cases.The most obvious feature in this period is that there is no formal legal norm for insolvency and debt repayment.Consequently,the insolvency customs,legal precedents and interpretations,the Insolvency Law of 1906,insolvency cases,and the Insolvency Law(Draft)that failure to go into effect,etc.have become guidelines for handling insolvency cases.More official power join into the subjects in charge of the liquidation of insolvency debts,and have formed a cooperative and competitive relationship with the private chambers of commerce,but the division of powers between these two subjects is not very clear yet.On the distribution of liability and benefits,it has both traditional and modern characteristics.It not only retains part of the priority protection of official funds and the habit of distribution of responsibilities in traditional households and shops,but also explicitly eliminates insolvency punishment,reiterates the limited liability of the shareholders of limited company and the unlimited liability of the partners in the partnership,recognizes debt relief conditionally,consolidates the order of debt repayment based on the nature of the debt,and introduces the depositors' priority repayment in the insolvency of financial savings institutions,etc.On the whole,the development of insolvency repayment system in the early period of the Republic of China was a process of gradually moving closer to modern insolvency law,and also was a process of continuation of insolvency customs that partially conformed to the principles of modern insolvency law.In the 1930 s,because of the world economic crisis,the insolvency phenomenon became more and more severe,and there was an urgent need for a formal insolvency law in practice.Under the influence of the prevailing social standard ideology,the Civil Committee of the Legislative Yuan of the Nanjing Government formulated a new Insolvency Law.The law establishes a social standard order for insolvency and debt repayment.It treats the debtors as much tolerant as possible for the reason and purpose of safeguarding the public interest,and grants bankrupts who are not committed to fraudulent crimes of certainly debt relief.At the same time,in order to balance the interests of the debtors and creditors,the law lays emphasis on compromise,and it also stipulates various restrictions on the debtor's behavior and rights to prevent the debtor's possible disadvantageous actions against the creditor.In terms of the distribution of benefits among creditors,the law stipulates that all ordinary claims shall be paid equally except for expenses of bankruptcy estate,debts of consortium and exemption rights.Excessive lenient to the debtor and the requirement of equal repayment of all ordinary claims have caused certain problems.Local insolvency practices have made some corrections,and the Judicial Yuan has successively made a series of explanations on the order of repayment of taxes and labor claims.After the implementation of the Insolvency Law of 1935,the handling of insolvency cases tends to be more unified,the division of powers between the court and the chamber of commerce is clearer,and the local doubts in application are also interpreted by Judicial Yuan.However,according to the statistics of insolvency cases in Jiangjin County from 1935 to 1947,it can be found that there is still a gap between insolvency law and practice in the grass-roots counties.Although insolvency claims have increased,the number of bankruptcies granted by the judicial organs is extremely rare,a large part of the insolvency disputes are settled through mediation or compromise outside the court.Due to the interweaving of insolvency legal systems,customs and practices,the transmutation of the insolvency debt repayment system during the late Qing Dynasty to the Republic of China shows peculiarly characteristics.From the perspective of the degree of liability of the insolvent debtor,comparing with the development of Western insolvency law,it is easy to find the abnormalities of the insolvency legal system in modern China.After the 16 th century,in Western countries like the United Kingdom and the United States,the debtor's liability level stipulated in the insolvency law shows a general downward trend.However,from the mid-18 th century to the early 20 th century in China,the debtor's liability level stipulated in the Daozhang regulations shows a linear increase,then by the time of the Insolvency Law of 1906,it drops sharply to a level roughly equivalent to that of Western countries.Such variation has created an illusion that there is a huge gap between traditional Chinese regulations on insolvency and Western insolvency laws.However,if the degree of debtor's liability in the insolvency customs is included in the comparison item,a completely different conclusion could be drawn.Whether in the customs of “apportionment” and “prosperity agreement”,or the debt repayment rules flexibly used by business organizations in handling insolvency cases,the degree of debtor's liability is much lower than the provisions of the Daozhang regulations,that is to say,much closer to Western insolvency laws.In other words,both western insolvency law and traditional Chinese insolvency customs occur in a relatively more natural process,but the Daozhang regulationsled by late Qing Dynasty's government are exceptions.The gradual reduction of debtors' responsibilities means that more risks and losses have to be borne by creditors.From the perspective of changes in the distribution of creditors' interests,the insolvency legal system in the late Qing Dynasty and the Republic of China experienced two stages of development.The first is “from identity to contract”,that is to say,the order of payment changes from distinguished by the identity of the creditor to distinguished by the nature of the creditor's rights;the second is to accept certain “returns of identities”,in other words,to give priority to repayment of deposits and labor claims.With the increasingly systematic insolvency legal system,the handling of insolvency cases is gradually organized.In the era of the Late Qing Dynasty,according to the Daozhang regulations,the government was responsible for convictions,sentencing and recovery of official funds,while the chamber of commerce was generally responsible for the part of insolvency debt liquidation,which means that an insolvency case was generally divided.The introduction of the Insolvency Law of 1906 weakened the official power,while chambers of commerce became the main organ to take charge of debt liquidation.During the period of the Republic of China,there was competition and cooperation between the government and the chambers of commerce.The division of powers between the two became clearer gradually.Therefore,the bankruptcy practice got rid of passivity and became a process actively promoting according to the law.These above characteristics can explain that the transmutation in the insolvency repayment system is dominated by economic and social changes.The transplantation of western insolvency laws in modern times has accelerated the culture of insolvency customs and the systematization of insolvency legal systems.The key issue in the development of the insolvency legal system is not the conflict between China and the West,but how the insolvency law should reasonably and timely allocate and adjust the liability or interests between the parties in insolvency.This is also the problem we should focus on in the process of improving insolvency legislation at present.