A Study On Chinese Factoring Legal System

Since nineteenth century,Chinese economic strength had a remarkable improvement,bringing drastically promotion in social productive forces,which also made it possible for production capacity going far beyond to consumption ability in consumer goods.Thanks to the globalized development of international trade,buyer's markets have emerged in China.With the impact of Just In Time(JIT)system and the worldwide expansion of supply chain economy,buyers gradually dominated the market and they often make deal by selling on credit.Meanwhile,suppliers,also sellers,need to constantly buy raw materials for production on one hand,and should bear non-recoverable risk for funds of sold goods on the other hand.Factoring was born at the right moment.Factoring is a comprehensive financial service.Basing on the premise of receivables generated from sale of goods or providing service by sellers,factors would offer at least one service in receivables management,collection,maintenance of sales ledger,advance payment financing,and full protection against.bad debts.Factoring has had a significant development after it was brought in China in 1980s.China also represents the largest factoring market for four years in a row since 2011.However,against rapid development context,factoring was also work on a huge range of problems.Factoring has been introduced as a new type financial service by domestic market,thus,a series of problems triggered a mess in factoring field and there were also lots of disputes in factoring contracts.Such as various of factoring products confused consumers,people were lacking of recognition toward factoring,professionals in short supply,regulatory policies vary from different cities,the unsoundness of social credit system and legal difficulties stressing on factoring business.A good legal system can guide and standardize factoring development direction,helping it go on a sound road.But as a matter of fact,China still need legal items over factoring,and the hysteretic nature of legislation make itself go behind the demands of new factoring business.So this paper aims at finding measures to improve legal system,making factoring more regulatory to boost the development of enterprises and the real economy of our country.This paper includes five sections.The first section introduces the definition and classification about factoring,analyzes its legal nature.By collating and comparing different theories,we give factoring a nature as new cession of the obligatory right to illustrate current situation of legislative and practical factoring business.In the second part,we talk about relations between factoring and law,analyzing its legal requirements to understand its legal foundation and how to operate factoring on the basis of law.Third,we analyze transfer of receivables,the core and foundation of factoring business,specifically analyzed the legal requirements involved in the factoring as the objects of factoring receivables transferring,the most important of which include the receivables legitimacy,the limit,and the assignability.That leads to the difference between the creditor's rights of receivables and the traditional creditor's rights transfer during the operation of factoring business.The comparative analysis of the legal regulations of Germany,France,Anglo-American and international factoring laws is of great significance for the prohibition of receivables assignment in factoring contracts.The author believes that the Prohibition of Assignment Terms can not deny the legal effect of the factoring contract,which can only produce the effect of enabling the Assignee to assume the liability for breach of contract.The following is an analysis of the internal and external validity of the assignment of receivables.Among them,internal effectiveness refers to the legal effect between creditors and the factoring,which mainly involves the replacement of the creditor by the factoring company and the creditors' rights of liability of warrant for defects;the external validity includes the legal effect on the debtor and the third party.Through the analysis of the effectiveness of the debtor,it leads to the "Notice" in the assignment of credits and debts,and discusses the time,subject,content and form of the notification;the effect on the third party mainly involves the multiple assignment of the claims on receivables Problem,via the comparative study of Germany,France,the United States' priority theories,that our country can learn from the United States "unified commercial code" established in the registration system,by means of register priority mode to determine assignor priority.The fourth parts refer to some targeted legal risk prevention and control measures for factoring business risk points,including proactive investigation and in-process risk monitoring.There are some advices about well establishing factoring legal system around China in the fifth sections,which including advices on improving traditional cession of the obligatory right system and importance of establishing the social credit system,striving to boost a sound development of factoring in China.