Legal issues related to the transfer of financial non-performing claims.
Published:
2010-07-01
Abstract:The transfer of financial non-performing debt is a very economical way of asset disposal for asset management companies. In recent years, due to the increasing number of disputes arising from the transfer of financial non-performing claims, such cases have attracted attention due to a wide range of social impacts. At the same time, due to the imperfect legal norms in the process of disposal of non-performing assets in the country at this stage, the handling of such cases has encountered a series of problems, and the balance of interests of all parties in the transfer of financial non-performing claims litigation cases has been impacted. From the perspective of legal litigation practice, this paper combs the main judicial views of the court's trial of financial non-performing claims transfer cases at this stage, and discusses them at a certain level.
Key words:Asset Management Company Financial Bad Debt Transfer Judicial View.
Financial institutions are always faced with the possibility of non-performing assets. Huarong, Great Wall, Dongfang and Cinda asset management companies try to revitalize the non-performing assets stripped by banks through the acquisition, management and disposal of non-performing assets. Dealing with non-performing assets through the "packaged" transfer of claims is one of the main means for asset management companies to dispose of non-performing assets and realize claims, which has also led to an increase in the number of such disputes in recent years.
The characteristics of the "packaged" transfer case of 1. financial non-performing claims.
From the author's many years of experience as a lawyer in financial cases, such cases have more distinctive features:
In terms of the subject of litigation, the vast majority of cases are from the four major state-owned financial asset management companies to transfer financial non-performing claims as the plaintiff, the debtor or guarantor of financial non-performing claims as the defendant, mostly involving state-owned enterprises or state-owned enterprises holding companies.
In terms of the amount of the subject matter of litigation, the vast majority of cases are not large in themselves, but the amount involved in the transfer of claims and asset packages is huge and generally involves state-owned assets.
In terms of social impact, the plaintiffs in the vast majority of cases filed an application for litigation preservation at the same time as the lawsuit, and the clues and status of the defendant's property have been clear. The court has taken litigation preservation measures against the property of the vast majority of defendants in accordance with the law. As a result, the production and operation of many state-owned enterprises have been seriously affected, and the social response has been great.
On the issue of the focus of the dispute, the dispute between the parties in most cases revolves around whether the procedure for the transfer of creditor's rights is legal, whether the contract and behavior of the transfer of creditor's rights are effective, whether the method of notification is legal, whether the guarantor should bear the responsibility of guarantee, whether the four state-owned financial asset management companies and even the four major state-owned commercial banks that should transfer the creditor's rights should participate in the litigation as the third party.[1]
2. Court's Judicial Views on the Main Disputes in the Case of Financial Non-performing Creditor's Rights Transfer
Subject of (I) Litigation
1. The question of whether a third person should be added to the proceedings.
The defendant in such cases requested the asset management company that additionally transferred the financial non-performing creditor's rights to participate in the litigation as a third party, on the grounds that the asset management company had major fault liability; the creditor's rights transferor asset management company and the creditor's rights transferee (the plaintiff in each case) knew all the facts, and the asset management company's participation in the litigation facilitated the court to find out all the facts of the case.
The courts did not form a unified opinion on this issue in the trial. It is generally believed that in the factual determination of the case, the relationship between the financial asset management company and the creditor's rights transferee, and the relationship between the creditor's rights transferee and the debtor are two Separate and independent legal relationships, so whether the financial asset management company participates in the lawsuit as a third party will not affect the determination of the facts and legal liabilities of the case.[2]
In the context of the economic crisis, the Supreme People's Court issued the "Minutes of the Supreme People's Court's Symposium on Hearing Cases Involving the Transfer of Financial Non-performing Claims" in April 2009, which stipulates: "After the invalidation of the bad claims transfer contract filed by the debtors of state-owned enterprises is accepted, the people's court shall list the financial asset management company and the transferee as parties to the case; if the transferee's claim is acquired as a result of another transfer or multiple transfers by the transferee after the transfer of the financial asset management company to another transferee, the people's court shall list the financial asset management company and the transferor and the subsequent transferee as parties to the case." This provision explicitly lists financial asset management companies as parties to the case, but only applies to claims of invalidity of contracts brought by debtors of state-owned enterprises.
The author believes that for the transfer of financial non-performing claims that do not involve state-owned enterprises, also.The financial asset management company should be listed as the third party in the lawsuit.Article 3 of the Notice on Issues Concerning the Trial of Disputes over the Divestiture of Creditor's Rights of State-owned Commercial Banks from Self-owned Companies issued by the Supreme People's Court in April 2008 stipulates that "if the parties cannot reach mediation, if the creditor's rights of the transferee are directly transferred from the financial asset management company, the people's court shall list the financial asset management company as a third party to participate in the litigation. If the creditor's rights of the transferee are transferred by the financial asset management company to other transferee, if it is acquired as a result of the transferee's re-transfer, the people's court shall list the financial asset management company and the transferor as third parties to participate in the proceedings." The circumstances in which this provision applies are the same as the factual circumstances in the case of a "packaged" transfer of a financial distressed claim, except that the scope of the assignee of the claim is different. In the trial of financial non-performing claims transfer cases that do not involve state-owned enterprises, this provision can be referred to, and the financial asset management company that "packaged" the transfer of financial non-performing claims can be listed as the third party in the case to participate in the litigation. This will help the court to analyze the case more comprehensively, correctly determine the legal responsibility and make a fair judgment.
2. The issue of the inadmissibility of the lawsuit against the debtor of the state-owned enterprise in which the creditor's right assignee claims to pay off the debt to the debtor of the state-owned enterprise in the policy bankruptcy.
The Minutes of the Symposium on the Trial of Cases Involving the Transfer of Non-performing Financial Claims by the Supreme People's Court stipulates: "If the case has one of the following circumstances, the people's court shall not accept it:... The (II) creditor claims to pay off the debts to the debtor of the state-owned enterprise that has been closed and bankrupt by the state policy, and the (III) creditor claims to pay off the debts to the debtor of the state-owned enterprise that has been included in the national enterprise policy closure and bankruptcy master plan approved by the State Council and intends to implement the closure and bankruptcy...The transferee of the (V) sued the original state-owned bank on the grounds that the non-performing creditor's rights were defective after the financial asset management company had transferred the non-performing creditor's rights..."The provision is basically for policy reasons to completely prevent the assignee of the claim from claiming rights through the court to the debtor or guarantor of the state-owned enterprise, whether it is fair is actually worth exploring.
The author believes that, according to the principle of fairness of civil and commercial law, the above provisions in fact to abolish the assignee of creditor's rights to claim the rights through judicial means to the creditor's rights of the false, also does not provide a positive compensation mechanism, is not conducive to the settlement of disputes, and the provisions also ruled out the possibility of subsequent creditors to claim the rights of the original state-owned bank as the defendant due to the reasons of defective claims, which seems to some extent conniving state-state-owned banks suspected, it does not conform to the principle of fairness and justice.[3]
The validity of the contract for the transfer of (II) claims.
1. The question of whether a natural person should be the subject of the transfer in the transfer of claims.
At present, the transferee of the "packaged" transfer of non-performing financial claims of the four state-owned financial asset management companies is mainly an enterprise legal person, but it is understood that there are also natural persons as the transferee. The Minutes of the Symposium of the Supreme People's Court on the Trial of Cases Involving the Transfer of Non-performing Financial Claims stipulates that "if a financial asset management company transfers non-performing claims under the following circumstances, the people's court shall determine that the transfer contract harms the national interest or the public interest or violates the mandatory provisions of laws and administrative regulations and is invalid:… (IX) that the transferee is a national civil servant, a staff member of a financial regulatory agency, a police officer of political and legal affairs, a staff member of a financial asset management company, a debtor manager of a state-owned enterprise, a lawyer, an accountant, an appraiser and other intermediary institutions involved in the disposal of assets, or a legal person of a non-financial institution in which the above-mentioned related persons participate; the transferee of the (X) is directly related to the staff of the financial asset management company involved in the transfer of non-performing claims, the debtor of the state-owned enterprise or the person in charge of the entrusted asset appraisal institution..." Accordingly, institutions in China and natural persons other than the above-mentioned persons can become the subject of the transfer of financial non-performing assets.
In my opinion, it should be taken into account that if a natural person is the subject of the transfer, it is possible to become a creditor of a state-owned enterprise, or to mediate in the financial sector. Natural person recovery, because the natural person can not determine the purpose of the purchase of claims, which does not exclude the possibility of speculation and other issues. Therefore, how to effectively avoid the adverse consequences of the transfer of claims to natural persons should be studied.
2. The loss of state-owned assets in the "packaged" transfer of financial non-performing claims, and its impact on the determination of the validity of the contract or act of the transfer of claims.
Asset management companies directly transfer non-performing financial assets to non-financial institutions such as legal persons, other organizations or individuals by means of package sale, auction and bidding, and sign creditor's rights transfer contracts with them, so as to partially realize the recovery of non-performing assets. When asset management companies transfer non-performing financial assets through the above-mentioned methods, the transfer price is often much lower than the amount of the original claim, thus causing the loss of state-owned assets. Some assignees of creditor's rights only transfer the consideration of the creditor's rights at a price equivalent to a few percent or even lower of the financial non-performing creditor's rights, and after "packaging" the transferred creditor's rights, they claim the full amount of the creditor's rights to the debtor, guarantor or other interested parties through a case or division of litigation, and obtain huge profits.[4]
There are also differences in trial practice regarding the validity of the contract or act of transferring financial non-performing claims at a low price. The general court held that based on the facts that have been ascertained, it can be preliminarily determined that the low-price transfer behavior, and the financial asset management company and the transferee of the creditor's rights have colluded with each other in advance, which harms the national interest, and obviously violates the Ministry of Finance's "Financial Asset Management Company Asset Disposal Management Measures (Revision)" "" When asset management companies transfer non-performing assets, they strictly prohibit black box operations, internal transactions, private disposal, in order to prevent the loss of state-owned assets ", the contract or act of transfer of claims is therefore invalid. In fact, there are no clear provisions or unified norms on how to determine the "low price transfer" and other issues, and the discretion of the court occupies the main position.[5]
The author believes that the transfer of financial non-performing claims is a commercial market transaction behavior, should follow the law of market operation and competition, the commercial risk and opportunity of the transferee of the creditor's rights are the same, it may be the transfer of the creditor's rights into the real property interests, but also may be due to the inherent risk and not worth the loss. The higher return obtained by the transferee of the claim may be due to the unique property information of the debtor, the change in the debtor's solvency after the transfer of the claim, or the transfer of the claim at a low price due to the illegal operation in the process of transferring the claim. For whatever reason, as long as the transferee of the claim does not participate in the illegal operation of the transferor and is unaware of the transferor's violation of laws and regulations, the contract or act of transfer of claims shall be deemed valid. The higher return to the transferee is a fact that occurs after the completion of the performance of the contract of assignment of claims, and subsequent facts cannot be the basis for the conclusion of the contract.
With regard to the validity of the contract for the transfer of claims, the principle of determination that needs to be grasped should be the eleven situations stipulated in the Minutes of the Supreme People's Court's Symposium on the Trial of Cases Involving the Transfer of Financial Non-performing Claims. In addition, as long as it does not violate the mandatory provisions of laws and regulations, the contract should be found to be valid.
3, the creditor's rights "package" transfer contract after the termination or is found to be invalid after the return of the asset package.
In practice, the transferee, after the transfer of the claim, often realizes some of the claims in the asset package through the operation, and then the circumstances that lead to the termination or invalidity of the contract occur. The author once represented an investment company v. Huarong Asset Management Company Jinan office of the creditor's rights transfer contract dispute case, the court ruled that the contract was invalid after an investment company returned the creditor's rights. However, the litigation process was extremely lengthy, resulting in a change in the claims in the asset package and a significant reduction in the ratio of realized claims.
After a certain period of existence, the nature, amount and quality of the creditor's rights are bound to change, such as: the loss of the debtor or the guarantor, the reduction of solvency, the loss of the value of the collateral, etc., the return of the creditor's rights is not transferred on the same day, how to determine the change of the value of the creditor's rights? If the litigation process is long, the creditor's rights transferor may suffer losses. The author believes that the relevant laws on the disposal of creditor's rights in China should increase the determination of the creditor's rights status of the single creditor's rights by both parties at the beginning of the transfer of creditor's rights, and the change of the value and status should be investigated when the creditor's rights are returned. At the same time, the court should specify a reasonable time limit for the creditor's rights inspection, allow the financial asset management company to retain the creditor's rights guarantee fund, and make the financial management company investigate the facts and submit the inspection report, if the financial asset management company returns the guarantee fund and cannot unanimously approve it, it shall file a new lawsuit, and the cost of creditor's rights investigation shall be borne by the party at fault.
The legality of the announcement of (III) claims and the way of collection of claims and the corresponding guarantee liability.
Both the debtor and the guarantor as the defendant generally believe that the plaintiff in each case of the state-owned financial asset management company of the transferor of the creditor and the transferee of the creditor's rights has no legal basis for notifying the debtor and the guarantor of the transfer of the creditor's rights, collecting the repayment or claiming the creditor's rights by publishing an announcement in the press, and the debtor and the guarantor shall be exempted from the liability for repayment.
1. The issue of notification of the transfer of claims in the "packaged" transfer of financial non-performing claims by financial asset management companies.
Paragraph 1 of Article 6 of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Laws in the Trial of Cases Involving the Acquisition, Management and Disposal of Non-performing Loans of State-owned Banks by Financial Asset Management Companies stipulates that "after the financial asset management company has transferred the creditor's rights of state-owned banks, the original creditor's rights bank has issued a notice or notice on the transfer of creditor's rights in an influential newspaper at the national or provincial level, the people's court may find that the creditor has fulfilled the notification obligation stipulated in Article 80, paragraph 1, of the the People's Republic of China Contract Law". The judicial interpretation only addresses the transfer of claims between the original creditor bank and the financial asset management company, and specifically provides that the original creditor bank may resolve the notification obligation under the Contract Law by publishing a notice of the transfer of claims in a national or provincial influential newspaper. However, there is no clear stipulation on whether the financial asset management company can perform the notification obligation in the same way when it transfers the creditor's rights again after accepting the creditor's rights, especially when it "packages" and sells the financial non-performing creditor's rights.[6]
In my view, both the financial asset management company and the transferee of the retransfer of the claim should be allowed to enjoy the above-mentioned rights of the original creditor bank. on the one hand,In the case of conflict between the value of justice and the value of efficiency, the maintenance of the value of justice should be the first. The focus of the statute of limitations is to urge the right holder, not to exempt the obligor from liability. As long as the right holder publishes a collection notice in the newspaper, it indicates that he is actively defending his rights and should lead to the interruption of the statute of limitations.On the other hand, the Supreme People's Court has stipulated that financial asset management companies can collect claims from debtors and guarantors by issuing newspaper announcements. Therefore, the same method should be allowed for the transfer notice of financial asset management companies "packaged" to transfer financial non-performing claims, so as to promote the disposal process of financial non-performing assets.
2,The issue of the effective elements of the transfer of financial non-performing claims to the guarantor.
Although the Supreme People's Court has made it clear in its judicial interpretation that the original creditor bank and financial asset management company may collect the debtor's claim by means of a newspaper announcement, thus interrupting the statute of limitations, it has no clear stipulation as to whether the claim can also be collected by such an announcement. In 2002, the Second Civil Division of the Supreme People's Court, in its reply to the Qinghai Provincial High Court's "Request for Instructions on the Way and Procedural Issues for Creditors to Claim Rights to Guarantors during the Guarantee Period", made it clear that creditors can claim rights to guarantors by publishing a notice of collection of claims in newspapers. However, this reply is highly targeted and does not have a broad scope of application, and the question of whether the guaranteed claims set up after the implementation of the Guarantee Law are also subject to the same way as newspaper announcements for statute of limitations remains unresolved. The question of whether the effective elements of the transfer of financial non-performing claims to the guarantor should also be fulfilled through the above-mentioned notification procedure, except for Article 13 of the Regulations on Financial Asset Management Companies, which stipulates that "after the acquisition of non-performing loans by a financial asset management company, it acquires the rights of the original creditor against the debtor. The debtor, guarantor and relevant parties of the original loan contract shall continue to perform their obligations under the contract", the Guarantee Law and relevant laws, regulations and judicial interpretations, including relevant judicial interpretations, do not make corresponding provisions.[7]
In my view, since the secured claim is attached to the principal claim, the secured claim should be transferred with the assignment of the principal claim and, in theory, does not require a separate notification procedure. As long as the original creditor bank, or the original creditor bank and the financial asset management company jointly, or the financial asset management company and the transferee of the financial non-performing debt jointly perform the notification obligation in accordance with the above-mentioned notification procedures, the debtor and the guarantor shall bear the corresponding legal liability.
The legislation on the disposal of non-performing financial assets in 3. and the trial environment of related cases need to be improved urgently.
A sound market must have a sound legal system to ensure its operation. It has been more than 10 years since the establishment of the non-performing financial claims disposal market in 1999, but the construction of the relevant legal system is still lagging behind in general, and the imperfection of the system makes the disposal of non-performing assets arbitrary, which is harmful to the country's overall economy.
At present, most of the relevant systems for the disposal of financial non-performing assets are in the form of normative or non-normative documents at a lower legal level, such as departmental rules, notices and opinions of the competent departments. the basis for the application and implementation of administrative regulations, laws and other legal sources at a higher level is relatively rare or even completely absent. The most effective so far is the Regulations on Financial Asset Management Companies promulgated by the State Council in 2000, but this regulation only has a certain guiding and normative significance for the financial non-performing asset disposal market that was just launched at that time, and it is obviously not forward-looking and cannot effectively guide the current trial practice. There are only a few judicial interpretations formulated by judicial organs so far. For example, the provisions of the Supreme People's Court on Several Issues concerning the application of law in the trial of cases involving the acquisition, management and disposal of assets formed by non-performing loans of state-owned banks by financial asset management companies have only 12 articles, Only individual provisions are made on the qualification of litigation subjects and litigation jurisdiction of the offices of financial asset management companies. Other judicial interpretations include the Notice of the Supreme People's Court on the Payment of Litigation Costs for the Disposal of Non-performing Assets of State-owned Commercial Banks by State-owned Financial Asset Management Companies, and the Supplementary Notice of the Supreme People's Court on Issues Related to the Acquisition and Disposal of Bank Non-performing Assets by Financial Asset Management Companies, the Supreme People's Court's Reply to the Letter on Issues Concerning the Implementation of the "Twelve" Judicial Interpretation of the Supreme People's Court minutes of the Symposium on the Trial of Cases Involving the Transfer of Financial Non-performing Claims, and numerous scattered responses and comments on specific issues. In short, the existing normative legal documents related to the disposal of financial non-performing assets are not systematic, and the legislative level is low. In terms of content, they are in line with the Contract Law, the Property Law, the Guarantee Law, the Company Law, and the Civil Procedure Law. There are contradictions in these basic laws.[8]
In this environment, we should step up the formulation of special laws on the disposal of non-performing assets, and give perfect legal regulations on the transfer of financial non-performing claims by asset management companies. Only a sound, independent and complete legal system can provide a solid foundation for the development of the asset management industry.
Comments
[1] Study on the issue of standardizing the trial of cases involving the disposal of non-performing financial assets, the Second Civil Division of the Higher People's Court of Shandong Province, Shandong Trial 2008(4)
[2] Safety or Benefit, A Brief Analysis of Several Texts-A Brief Discussion on the Current Legal Environment for Disposal of Non-Performing Assets Tang Jun Beijing Arbitration Series 69
[3] Reflections on the disposal of banks' non-performing assets Kong Yongxin Modern Commercial Bank Guide 1999(5)
[4] Research on legal issues related to asset management companies Huang Zhiling, Che Xinting Journal of China Institute of Finance 1999(4)
[5] Study on legal issues related to the trial of cases involving the transfer of non-performing financial claims Xia Linlin 2009 of application of law (2)
[6] Research on Legal Issues of "Secret" Transfer of Non-Performing Claims Shan Yunjuan Frontier 2007(11)
[7] Analysis of the legal nature of the transfer of financial claims Niu Liyun's 2005 on financial theory and practice (12)
[8] Litigation Dilemma and Countermeasures of State-owned Financial Asset Management Companies Li Chenghua Yao Xiaodong Research Journal of Beijing Institute of Industry and Technology Vol. 8
References
[1] Study on the legal mechanism to prevent non-performing credit assets Huang Xuehai International Finance Research 1999(3)
[2] On the Legal Adjustment of Financial Asset Management Companies Huang Jianhua China Financial 2000(3)
[3] Non-performing assets of Chinese banks from a legal perspective Ba Jinsong Financial and Insurance 2000(7)
[4] Review and Reflections on the Development of Financial Asset Management Companies in China Wang Xingyi China Financial 2002(8)
[5] Legal Reflections on Financial Asset Management Company Litigation Huang Xianfu South China Financial Research 2003 (2)
[6] Legal Issues of Asset Management Companies Chen Zuji Shanghai Financial 2002(4)
[7] Determination of the validity of contracts for the transfer of bad claims Wu Xiaopeng Liu Yanbing People's Civil Law Academy Report 2006(11)
(This article won the third prize of Jinan excellent lawyer paper in 2010)
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