The "Corporate Bankruptcy Law" will apply to foreign companies as well as Chinese firms and protect the rights of both creditors and workers, according to officials from the standing committee of the National People's Congress.

The law, which will come into effect on June 1 next year, allows creditors or financial supervision agencies to initiate bankruptcy proceedings against companies whose management are unwilling to do so, officials said.

Some unprofitable Chinese companies, including state-owned firms, have fallen into such a financial mess that they have been unable to pay workers' wages or bills.

Unlike the old bankruptcy law, which was promulgated in 1986 and only applied to state-owned companies, there were no clear guidelines on how the companies could be dissolved and the assets split among employees and creditors.