A Study On The Conflict Between Assignment And Rights Of Accounts Receivable In Factoring

Throughout history, factoring officially landed on commercial banks of China in October, 1987. In recent years, the number of factoring business in China has been growing. More and more commercial banks as well as factoring companies launched factoring business. However, there exists a gap between China and western developed countries with respect of both the scope and quality of factoring. The reasons of narrow scope of business, lack of types and small scales of factoring business in China are as follows:In the view of the macro environment, firstly, the relevant laws and regulations of factoring business in China are relatively hysteretic, and the legal protection system has not yet in line with the national conditions of the factoring business in China, which has influenced the development of factoring; Secondly, China has not established a complete credit trading system, and credit environment is not perfect, so the risk of factoring operation is high.In the view of factors, single type of factoring products and lack of market segmentation are unable to meet customer’s diverse demands. Factoring business process is inflexible, which results in customer erosion. Backward equipment has a bad effect on the information transfer and the mutual exchange of the domestic factoring companies with the foreign supplier, as well as reduces the accuracy and timeliness of factoring business information exchange. Lack of both talents and practical experience has a bad impact on the development of the factoring business.In the view of the customers, Chinese enterprises are not fully aware of factoring business, and some companies can’t adapt to it, which impeded the development of the factoring business in our country. What’s more, the credit accounts receivable management level of Chinese enterprises is relatively low. The average default rate of accounts receivable is up to 14%, which creates greater risk for factoring business.Currently, there’s a lack of specific legal provisions in the field of factoring. Although "Contract Law" provides some excellent provisions on assigned claim, there is a lack with respect to the problem of priority of conflict of rights in factoring business. Once dispute happens, Factor would face with great risks. The purpose of legal system, serving as a legal norm, is to resolve conflicts of interest in society. So the relative stability of the legal system is a manifestation of authority, which will provide everyone the possibility to predict the consequences and make it easier to be able to arrange their own behaviors. The legal system should be revised with the society change in principle, but it’s always unavailable to be timely corrected due to some reasons such as the lack of legislative techniques. On this occasion, when the parties distributing benefits and risks of each other, the exploration and explanation based on current legal system is quite important. Besides, this paper focuses on the conflict of rights, namely "Priority issues", as well as corporate law, bankruptcy law and the national registration system, etc. Consequently, when amending the relevant laws regarding to factoring in the country, relevant institutions should be further improved.As the theme of this article, factoring will be deeply studied under civil law vision starting with the assignment of creditor’s rights and with detailed analysis of the various rights conflict occurring in factoring in order to come to a reasonable and effective way to solve the problem.The article is divided into five parts. Part Ⅰ focuses on the basic concept of factoring. Then the paper will analyze the difference of concepts defined by the factoring international Convention, domestic trade association reports, local and national normative documents and domestic scholars. Through the analysis above, writer will obtain a suitable definition of factoring. Based on the definition aforementioned and basic principles of civil law, this paper makes the analysis and demonstration on four theories in connection to the nature of the factoring launched by educational circles, and solves this problem by summary. At last, this paper returns to the domestic situation and explains the current state of development of factoring in our country through the International Factoring Association(FCI) data website statistics analysis.PartⅡ focuses on the core problem of factoring, i.e. the main issues in the transfer of accounts receivable, which will be discussed in depth. In practical terms, it is about the problem of assignability in future receivables and the problems due to "notice" in the dark factoring. This part will be a steppingstone to the following parts, which would deeply discuss the issue of conflict in the process of transfer of accounts receivable.Part Ⅲ is the main part of this paper, primarily from the four perspectives, namely, the multiple transfers, retention of title sale, bankruptcy, and other rights holders, discusses about the conflict of rights with respect to the transfer of receivables. Specifically, the paper talks about the reason, the impact, the current national practices of the conflict of rights, as well as the provisions of the relevant laws of the problems. The purpose of the paper is to study from the countries through various rights on factoring solution to the conflict, and to develop our factoring business under the circumstances where there is no provision of international factoring business practices.Part Ⅳ is based on the status of the factoring business and the conflict of rights discussed above, and makes suggestions for the further development and expansion of the factoring business.Part Ⅴ is the conclusion of the paper, which summarizes the various issues of the four parts above, and makes a prospect of factoring system in the further development of our country.