Legal Risks And Preventions Of The Transfer Of Receivables On Factoring

Dated back to 1987,China's factoring has become an important trade financing instrument for enterprises after thirty years of development.Ever since 2011,China has been the largest factoring market worldwide for five years successively.While the factoring industry is developing rapidly,we should also admit that China's factoring industry is still in its early stage and confronted with multiple risks including ambiguous scope of factoring service,incomplete legal system,imperfect credit information system and insufficient professional talents,which are impacting the healthy and orderly development of China's factoring industry.With the transfer of receivables as the basis and core of factoring,this paper focuses on legal risks involving the transfer of receivables in China's factoring industry,in an attempt to put forward legislative recommendations and measures to deal with risks.This paper consists of four parts:Part One:overview of factoring.Firstly,by referring to domestic and foreign publications and laws®ulations,the concept of "factoring" is set forth,while three main ideas concerning the legal nature of factoring are analyzed with the help of domestic and foreign researches on factoring,and further,it is indicated that the legal nature of factoring should be positioned as assignment of credit.And analysis on the legal relationship of participants in factoring.Part Two:the scope of transferable receivables in factoring.On the basis of understanding the concept and scope of receivables,transferability of future receivables and receivables attached with provisions against assignment in contracts are analyzed by referring to laws of other countries and international treaties.Part Three:summary analysis of legal risks that influence the transfer of receivables in factoring operations.Firstly,The article analyzes the risks from basic contract,including the basic contract itself is invalid?accounts receivable under basic contract may transfer?the debtor exercise the right of defense and right to offset the risk.Secondly,The article analyzes risks from the notice of transfer of receivables.Thirdly,The article analyzes risks of right conflict among several right owners of receivables involved in factoring contract.Finally,The article analyzes potential risks from unclear law application.Part Four:legislative recommendations and precautions for legal risks with respect to transfer of receivables in factor.Firstly,laws and regulations related to transfer of receivables should be improved to affirm the transferability of future receivables and those attached with provisions against assignment,Secondly in terms of notice of transfer,the subject and methods for notice of transfer should extended.Thirdly,China's registry system of transfer of receivables should be improved and the legal effect of the same should be defined.Finally,the construction of social credit system related to factoring should be refined.