Page 20 - 2021 Policy Watch

Policy Watch: A Milestone in Legal Development: China Promulgates a Civil Code
The Civil Code states that a factor shall present its iden-
tity as a factor, attaching necessary evidence when issu-
ing a notice of assignment of accounts receivable to the
debtor of accounts receivable32. Article 546 of the Civil
Code adopts Article 100 of the Contract Law, providing
that if a creditor assigns its credit without notifying the
debtor, the transfer will have no effect on the debtor.
The additional provision that in a factoring contract, a
factor shall notify the debtor, not only recognizes the
effect of the notice, but also requires the factor to pres-
ent its identity, attaching the necessary evidence for
debtor?? review, so as to protect the debtor?? interest.
At the same time, the Civil Code also provides that a
creditor of accounts receivable and a debtor shall not
claim against a factor if they change or negotiate the
basic contract without proper reasons, and they have
the right to choose to request the factor exercise in case
of recourse factoring, the scope of the factor?? rights
in case of non-recourse factoring, the sequence of the
factor?? rights in case of several factoring contracts, etc.
The Interpretation of the Supreme People?? Court on the
Application of the Guarantee System in the Civil Code
of the People?? Republic of China further elaborates on
how to deal with factoring and pledges of accounts re-
ceivable in the same accounts receivable group33. If the
accounts receivable include factoring and pledge of ac-
counts receivable at the same time, the priority of the
party concerned will be the same as the sequence of the
factors at the conclusion of the factoring contracts;
the registered factors will be prior to the non-registered
factors; if all the factors are registered, the former regis-
tered factors will be prior to the later registered factors;
if all the factors have not been registered, the factors
that has received the notice of assignment from the
debtor of the accounts receivable shall have priority.34
f. Partnership Contracts
The legal system of China?? partnership law integrates
the respective adjustments in the general provisions
and chapter on contracts in the Civil Code, as well as
32 Civil Code, Article 764
33 Interpretation of the Supreme People?? Court on the Application
of the Guarantee System in the Civil Code of the People?? Republic of ????????æ³???????ä¸??¾æ?è§?????æ°?º«???
China, Article 66
34 Civil Code, Article 786
20
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