On October 25 2017 the People's Bank of China (PBOC) released the revised measures for the registration of a pledge of accounts receivable (PBOC Ling 2017 No 3), which will come into effect on December 1 2017. The implementation of the revised measures provides a legal basis for a pledge of accounts receivable in China.
The revised measures have broadened the definition of 'accounts receivable' by adding that it includes "other rights entitled by the right holder under the law to claim payments". It therefore covers payment rights that derive from the performance of underlying contracts. As well as the accounts receivable listed in the definition by the PBOC, the revised measures add a miscellaneous provision for "other claims that are based on contracts and involve monetary payments". According to such miscellaneous provision, the income rights of some financial products can be registered as the subject of pledge of accounts receivable.
The revised measures also introduce a procedure for registering to transfer accounts receivable, stating that "right holders shall file registration of transfer of accounts receivables for financing purpose in the system in accordance with the Revised Measures". This makes up for the lack of legislation in this regard and provides optional safeguards for the security of transactions conducted by market entities (eg, commercial banks) in factoring.
In accordance with the revised measures, and as evident from previous experience in filing a registration of accounts receivable, the 'pledger' and the 'pledgee' will include domestic and foreign entities and individuals. The registration should be handled by the pledgee. However, if the pledgee is a foreign entity and is therefore unavailable, it may entrust an agent (eg, a law firm) to file the registration on its behalf.
To complete the registration, the pledgee must submit all relevant information to the PBOC's official online registration platform.
For flexibility and convenience, the revised measures also adjust the registration term of a pledge of accounts receivable and extend the time limit for notifying a pledgee of any objection to its registration.
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