The collection of debt in China can only be performed by a licensed Chinese law firm or by licensed specialists in the field. This type of action falls into the category of legal services and it can only be performed by accredited professionals. Foreign investors who need assistance for collecting debts or securing any due payments can address toourlawyers in China which can offer debt collection services. It is important to know that the debt collection in China can only be performed through legal entities registered in the Chinese territory.
Debt collection procedure in China
The relationship between business partners and/or clients can deteriorate over time if the debts are not paid in due time. Such a situation can be an effect of various reasons, but most of the debts are caused by unpaid contractual provisions - one of the parties can’t or refuses to pay in accordance with the terms of the contract signed by the other party. Unjust enrichment or poor management of a business, as well as management without a mandate, can also be probable causes for debts in China.
The debt recovery procedure starts by addressing a letter to the debtor. The debtor or the indebted company is informed of any existing debts towards the claimant and, if the debtor is responsive, ourlaw firm in China can start the negotiation process with him in order to obtain the payment in the shortest amount of time possible.
Our Chinese attorneys will also perform a deep background check on the debtor in order to establish the business relationship that developed between the two parties and analyze the current debts. If, however, the debtor does not respond to the letter, then our lawyers will begin the necessary legal procedure to bring the claim to court.
Debt recovery methods
The situation described above, where the parties can meet and negotiate over the payment of debt, is considered to be the amicable procedure. If this phase is unsuccessful, our attorneys in China can provide the company’s management with other solutions, such as litigationor arbitration.
The latter is a preferred method, based on consultation and a previously signed arbitration agreement, rather than taking the decision to commence a lawsuit. At the same time, the procedure is applied for the benefit of both parties, due to the limited time in which the decision is taken.
Investors who consider that arbitrationmay not generate the results they are hoping for can take the case to a Chinese court, which can provide a legal framework imposed by the parties involved. It is customarily for the debtors to negotiate a resolution of the case, rather than entering a lawsuit, a procedure which can be completed in more than a year and which can also involve high costs.
We invite you to watch a comprehensive video about the debt collection methods in China:
Debt collection in China is handled in the Chinese courts in accordance with the value of the claim; claims below RMB 50 million are heard in one of the basic courts in China, while claims above this sum are judged at the Intermediate Courts.
Our law firm in China will help you close any accounts after the recovery process is complete. For additional information on the debt collection procedures applicable here, please contact our attorneys in China.
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