Research On The Conflicts Of Rights In Assignment Of Receivables In Commercial Factoring

Commercial factoring is a new comprehensive financial product with assignment of receivables as its core,which can realize trade financing,collecting account receivables,managing sales sub-accounts and controlling credit risk.In the factoring business,the supplier assign to the factor receivables arising from contracts of sale of goods made between the supplier and its customers(debtors),and the factor provides financing or other services to the supplier.As a new method of debt financing,the assignment of receivables constitutes the basis and core of commercial factoring.However,under China’s current legal system,only the outdated rules for assignment of creditor’s rights in the Contract Law can be applied to commercial factoring.Due to the absence of related advancing rules,it is difficult to solve a series of problems faced in factoring practice just with the traditional theory of creditor’s rights.Among these problems,the representative one is the conflict of rights in assignment of receivables,in other words,the priority rules in assignment of receivables.The legislature in China is aware of the institutional needs of the factoring market,and in the Draft Version Civil Code of the People’s Republic of China issued by the legislators at the end of 2019,the factoring contract is a chapter in the Contracts Part of Civil Code as a special contract.This chapter makes a series of special provisions for factoring contracts based on the existing creditor’s rights assignment rules,including the priority rules in multiple assignment of receivables in factoring.Nevertheless,there are still some issues in commercial factoring that have not been fully resolved by the rules in the Draft Version of Civil Code.In this regard,based on the introduction and analysis of conflicts of rights in multiple assignment of receivables and in assignment and pledge of receivables in commercial factoring,this article analyzes the advantages and disadvantages of various solutions based on the evolution of legislation in some countries and the provisions of international treaties,in order to solve these problems and thus promote the healthy and sustained development of the industry of commercial factoring.This article is divided into four parts.The first part is an overview of commercial factoring.This article starts from the definition of factoring in the domestic and international scale,then summarizes the characteristics of factoring,and points out that the basis and core of commercial factoring is the assignment of receivables.Then,this article introduces the various approaches to classify factoring business under different standards,and analyzes the legal nature of factoring contracts and it is proposed that the factors of receivables assignment in factoring contracts are combined with the different functions of factoring to form different types of contracts,therefore the factoring contract is characterized as a mixed contract.In addition,the article first analyzes the nature of factoring receivables assignment,and uses the concepts of burden behavior and disciplinary action to point out that the factoring contract is an agreement on the assignment of creditor’s rights and beyond this there is another assignment action of accounts receivable.The second part of this article studies the conflict of rights in the assignment of factoring receivables.For the effectiveness of creditor’s rights assignment against a third party,the mainstream viewpoints are priority under assignment,priority under notification and priority under registration.This article makes a comparative and historical analysis of the specific provisions of these three viewpoints in the legislative history of various countries,and points out the value measurement and the advantages and disadvantages of each view.In the third part,regarding the conflict between the assignment and pledge of accounts receivable,based on China’s current account receivable pledge registration system,the article points out that China currently applies different priority rules to the assignment and pledge of accounts receivable,which leads to the conflict of rights between the assignment and pledge of accounts receivable.In the last part,this article analyzes the necessity and feasibility of establishing and improving China’s account receivables assignment registration system and makes some suggestions for improving registration rules of receivable assignment based on the rules in the draft version of Civil Code for the registration on the assignment of receivables in factoring,in order to help solve the conflict of rights in assignment of receivables in commercial factoring in two typical situations introduced and analyzed in the previous parts of this article.