On The Legal Framework For The Development Of Domestic Factoring

Domestic Factoring is a series of integrated financial services in domestic business, in which domestic sellers assign their factors of the current or future accounts receivable arising from the sales or service contracts between them on the basis of credit sale; and the factors provide the services of sales ledger maintenance, collection of account receivable, and bearing the buyers’ credit risks (bad debts) of accounts receivable.Domestic Factoring industry starts late in China, but it has developed rapidly in a short period of20years, which impacts and changes the traditional financing settlement mode of the domestic business. Rapid development of Domestic Factoring not only brings enormous profits to the banks and factors, but also provides convenience to the corporation in respect of financing management. However, the imperfect legal system on Domestic Factoring causes conflicts between the laws and regulations, and also carries high risks to the factors. This thesis mainly explores the legal framework of Domestic Factoring by analysis on the legal basis and nature of Domestic Factoring, and the relationships of the parties’ rights and obligations, and then seeks countermeasures to improve the Chinese legal system on Domestic Factoring.This thesis focuses on the discussion from two perspectives:First, the author analyzes the legal natures of Domestic Factoring from various aspects. Second, the author has made a comprehensive analysis on the conflicts and contraditions in the legal system of Domestic Factoring from the practices of domestic factoring, and puts forward to some proposals to perfect the legal system of Domestic Factoring.This thesis is divided into four chapters as follows:Chapter one briefly introduces the definition and classification of Domestic Factoring, and mainly discusses the legal environment and nature on Domestic Factoring.Chapter two aims to discuss the core issue of Domestic Factoring business-accounts receivable. The discussion starts from two aspects, i.e. transfer of accounts receivable and pledge accounts receivable, combined with the characteristics of Domestic Factoring.Chapter three mainly focuses on the discussions of the parties to Domestic Factoring and legal relationship between the parties from two perspectives, i.e. seller factoring and buyer factoring. The discussion also considers the fact that most domestic factorings in China are single factoring.Chapter four aims to propose a solution for perfecting the legal system of Domestic Factoring. Discussion starts from two aspects, i.e. normalizing the legislation on Domestic Factoring and establishing a rule system of credit information in line with the nature of Domestic Factoring.