Source: Li Shu Tang Qinglin Zhao Yuewen
Transferred from: Rules for Civil and Commercial Adjudication
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Reading tips: After commercial factoring was incorporated into the supervision of the financial system, along with the development of Internet finance, it showed a unique growth momentum, and the commercial factoring contract disputes that came with it also showed the characteristics of novelty, professionalism and complexity. As the development of commercial factoring in China is still in its growth stage, many laws and regulations, industry norms and commercial practice rules are still blank. The endless stream of commercial factoring disputes not only puts forward new requirements for the current legal system, but also poses considerable challenges to the fields of finance, law and Internet practice. To this end, at the request of friends in the industry, the financial business department of Yunting Law Firm combined with years of practical experience to officially start the sorting out of commercial factoring business norms, typical cases and risk response strategies, and summarized and shared them with a series of articles, hoping to provide help for factoring enterprises and related parties to better prevent business risks and successfully resolve disputes.
Summary of the Trial
The commercial factoring company acts as a financing channel to assist the lender and the borrower in fund financing, and the private lending contract relationship between the lender and the borrower is not a commercial factoring contract relationship.
Brief facts of the case
1. On September 6, 2016, Yisheng Company signed a financing agreement with Meichen Company, stipulating that Yisheng Company would set up a contractual fund to provide financing services to Meichen Company and its subsidiaries, and Meichen Company would transfer the accounts receivable claims to Jinghe Factoring Company. Jinghe Factoring acts as a financing channel.
2. During the period from December 2016 to September 2017, Meichen Company and its subsidiaries signed 52 commercial factoring contracts with Jinghe Factoring Company, transferring accounts receivable of RMB115,474,871.98 to Jinghe Factoring Company in the form of recourse commercial factoring, and Issuing financing of RMB61,652,943.84 to Meichen Company and its subsidiaries. The case concerned Commercial Factoring Contract No. 22.
3. On September 12, 2017, Meichen Company issued a letter saying that Yisheng Company and Jinghe Factoring Company did not issue financing funds as agreed and caused losses of taxes and fees to their subsidiaries.
4. On October 10, 2017, Yisheng Company issued a letter advocating the termination of the commercial factoring contract on September 21 and the termination of the financing agreement on October 10, respectively, on the grounds that Meichen Company and its subsidiaries had not returned the financing funds and refused to pay the financing fee.
5. The Shanghai Jinshan Court held that the commercial factoring contract was actually to provide channel services for the financing agreement, and the financing involved in the case was a loan, and Yisheng Company and Meichen Company established a loan contract relationship, so the judgment supported Yisheng Company's claim to terminate the financing agreement and return the principal and interest. Mason Appeal.
6. The Shanghai First Intermediate People's Court held that Meichen Company confirmed that the disputed loan was used for its subsidiary company to operate insurance business and did not produce evidence of the existence of illegal lending, and Yisheng Company raised and provided the financing funds involved in the case by setting up a private fund, which did not affect the validity of the loan contract. Meichen Company was not satisfied with the retrial. The Shanghai High Court rejected Meichen's application for retrial on the same grounds.
Court gist
The core focus of this case is the nature and legal effect of the underlying legal relationship, that is, whether the transaction of financing the assets of the fund through the commercial factoring relationship is a loan contract relationship or a commercial factoring contract relationship, and is it legal and valid?
1. In this case, the loan was made in the name of factoring. The biggest difference between factoring and lending is the transfer of the substantial receivables of the commercial factoring relationship, involving the creditor, the debtor and the factor. However, Jinghe Factoring Company does not pay attention to whether the accounts receivable are transferred and whether they are true in the transaction, but acts as a financing channel, which is completely different from the commercial factoring relationship. Therefore, the essence of this case is that Yisheng Company provided a loan for Meichen Company and its subsidiaries, which is a loan contract relationship and does not form a commercial factoring contract.
2. The provision of financing funds in this case by way of private placement does not affect the validity of the loan contract. Although there were as many as 52 contracts involved in this case, they were all based on the financing agreement between Yisheng Company and Meichen Company, which did not constitute a loan to an unspecified public, nor did it prove that Yisheng Company had illegally lent money. Furthermore, M&S. confirmed that the disputed loan was used by its subsidiaries to operate insurance businesses and not for other illegal purposes. Therefore, there are no statutory circumstances in which the loan contract involved in the case should be found to be invalid.
3. The repurchase factoring business in this case was not prohibited by the regulatory provisions, and Meichen Company claimed that the disputed repurchase factoring contract in this case was invalid and had no factual and legal basis.
Summary of practical experience
The professional legal team of Mr. Tang Qinglin and Mr. Li Shu of Beijing Yunting Law Firm have handled and analyzed a large number of legal issues involved in this article and have rich practical experience. At the same time, a large number of cases were also summarized and the experience of handling cases was published, and the "Yunting Legal Practice Book Series" was published, which is excerpted from the book series. The authors of the book series are all professional lawyers fighting in the front line of Beijing Yunting Law Firm, with profound theoretical foundation and rich practical experience. The topic selection and writing style of the book series are mainly based on the case analysis of actual occurrences, and strive to start from the needs of practice and seek the most direct solutions to difficult and complex legal problems often encountered in practice.
This case not only involves commercial factoring business, but also involves many business areas such as corporate lending, private equity funds and financial supervision, and the complexity of the transaction structure is typical. Combined with the practical experience summarized in this case, we summarize it as follows:
1. In the course of commercial factoring, the factor shall specifically review the authenticity of the accounts receivable. From the perspective of the laws, regulations and industry practices of factoring business, real accounts receivable are not only the core elements of commercial factoring business, but also an essential element of commercial factoring contracts, and are also indispensable to distinguish commercial factoring from private lending, sales contracts, financing channels and other businesses. It should be pointed out in particular that according to the provisions of the draft civil code and the new regulations on the supervision of commercial factoring, only the transfer of real accounts receivable can there be the existence of commercial factoring business, and if false accounts receivable or no transfer of accounts receivable occur, it is not a commercial factoring business. It can be seen that the factor will not only bear civil liability such as the inability to obtain financing fees and the invalidity of the contract, but also bear the administrative responsibility of being supervised by the CBIRC, and even constitute a criminal offense and bear criminal liability.
2. There will be a relatively narrow legal and regulatory space for lenders and borrowers to raise funds through the channel business of commercial factoring companies. The adjudication rules in this case further confirm that this practice, called factoring, is actually a loan has been prohibited by the new regulations of the China Banking and Insurance Regulatory Commission, requiring commercial factoring companies to return to their main factoring business and operate in compliance. In addition, in the context of increasingly stringent financial regulatory policies, lenders and borrowers raise funds by setting up contractual funds, and then raise funds from third parties, and then raise fund assets to third parties, there are also greater legal risks such as being identified as illegal fundraising, illegal absorption of public deposits, and exceeding the franchise scope of commercial banks. Therefore, enterprises or individuals with actual needs for financing should raise funds through legal financing methods to avoid embarking on the road of no return.
3. The pledged accounts receivable shall be registered in the credit reporting center to realize the delivery of the accounts receivable and produce the legal effect of the pledge of the accounts receivable. According to the Property Law and the Measures for the Registration of Pledges of Accounts Receivable, claims on accounts receivable are property rights that can be pledged for financing, and when the transfer occurs, they shall be registered in accordance with law at the credit information center. Therefore, the factor should specifically review the registration or pledge of the receivable in the course of its business to avoid the adverse consequences of the receivable not being transferable or non-transferable.
(China is not a case law country, and the precedents cited and analyzed in this article are not Guiding Cases, and are not binding on the trial and adjudication of similar cases.) At the same time, it should be noted that in judicial practice, the details of each case are very different, and the views of the adjudication in this article must not be directly quoted. The sorting out and research of the adjudication documents of different cases by the lawyers of Beijing Yunting Law Firm aims to provide more readers with different research angles and observation perspectives, which does not mean that the lawyers of Beijing Yunting Law Firm agree with and support the views of the adjudication of this case, nor does it mean that the court should necessarily cite or refer to such adjudication rules when handling similar cases. ）
Relevant laws and regulations
Civil Code of the People's Republic of China
Part III Contracts Article 761 A factoring contract is a contract in which an accounts receivable creditor transfers an existing or existing receivable to a factor, and the factor provides services such as financial integration, accounts receivable management or collection, and payment guarantee for the debtor of the accounts receivable. Article 762 The content of a factoring contract generally includes terms such as the type of business, the scope of services, the service period, the basic transaction contract, the information on accounts receivable, the factoring financing payment or the service remuneration and the method of payment thereof. The factoring contract shall be in writing. Article 763 Where an accounts receivable creditor and a debtor fabricate an account receivable as the subject of the assignment and conclude a factoring contract with the factor, the debtor of the accounts receivable shall not oppose the factor on the ground that the accounts receivable do not exist, except where the factor knows that the account receivable is fictitious.
Contract Law of the People's Republic of China (October 1, 1999) (lapse)
Article 124 The provisions of the General Provisions of this Law shall apply to contracts not expressly provided for in the sub-provisions of this Law or other laws, and reference may be made to the most similar provisions of this Sub-Provisions or other laws. Article 79 A creditor may transfer all or part of the rights and obligations of a contract to a third party, except in any of the following circumstances: (1) it shall not be transferred according to the nature of the contract; (2) it shall not be transferred according to the agreement of the parties; (3) it shall not be transferred in accordance with the provisions of law. Article 80 Where a creditor transfers its rights, it shall notify the debtor. The assignment is not effective against the debtor without notice. Notice of the transfer of rights by the creditor may not be revoked, except with the consent of the transferor.
Notice of the General Office of the China Banking and Insurance Regulatory Commission on Strengthening the Supervision and Administration of Commercial Factoring Enterprises (CBIRC [2019] No. 205)
1. Operate in accordance with laws and regulations (3) Commercial factoring is the following services provided by a supplier to which a supplier transfers its receivables based on real transactions to a commercial factoring enterprise: 1. Factoring financing; 2. Sales sub-account (classification) account management; 3. Accounts receivable collection; 4. Non-commercial bad debt guarantee. Commercial factoring enterprises should mainly engage in commercial factoring business, and can also operate customer credit investigation and evaluation, and consulting services related to commercial factoring.
(4) Commercial factoring enterprises shall not engage in the following acts or operate the following businesses: 1. Absorbing or covertly absorbing deposits from the public; 2. Integrate funds through online lending information intermediaries, various local trading venues, asset management institutions, private equity investment funds and other institutions; 3. Borrow or covertly borrow funds from other commercial factoring enterprises; 4. Granting loans or being entrusted with loans; 5. Specializing in or being entrusted to carry out collection business and debt collection business unrelated to commercial factoring; 6. Carry out factoring financing business based on illegal underlying transaction contracts, consignment contracts, accounts receivable with unclear ownership, payment claims arising from bills or other negotiable securities, etc.; 7. Other activities that the State stipulates shall not be engaged in.
Notice of the Supreme People's Court on The Issuance of several opinions > < on Further Strengthening Financial Adjudication Work (Fa Fa [2017] No. 22)
For financial violations that cover up financial risks, circumvent financial supervision, and carry out institutional arbitrage in the name of financial innovation, their effectiveness and the rights and obligations of all parties should be determined by the legal relationship they actually constitute. Where the illegal absorption of public deposits or fund-raising fraud in the name of financial innovation constitutes a crime, criminal liability shall be pursued in accordance with law. Where a financial lease contract or factoring contract is actually a loan contract, the rights and obligations of all parties shall be determined in accordance with the actual loan contract relationship, and the parties shall be prevented from using methods such as withholding rent or security deposit to raise the financing costs of the real economy in disguise.
Regulate the loan channel business of state-owned enterprises in accordance with laws and regulations, and prevent state-owned enterprises without financial qualifications from engaging in financial business in disguise. Where a state-owned enterprise without financial qualifications engages in financial business in disguise, arbitrages credit funds from financial institutions and re-lends at high interest rates, it shall, in accordance with article 14 of the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases, deny the legal effect of its lending behavior in accordance with law, and curb the loan channel business of state-owned enterprises and guide them to return to the real economy by submitting judicial suggestions to the corresponding competent departments.
"Some Specific Issues of the Supreme People's Court on the Current Commercial Trial Work" (December 24, 2015)
7. On the trial of factoring contract dispute cases Factoring business is a comprehensive financial service integrating receivable collection, management, bad debt guarantee and financing based on the premise that creditors transfer their accounts receivable claims, and is widely used in international trade. In recent years, the use of factoring in the field of domestic trade has increased significantly. ...... It should be pointed out that the essence of the legal relationship of factoring is the assignment of accounts receivable claims, involving tripartite entities and two contracts, which is significantly different from a simple loan contract, so the factoring contract should not be simply regarded as a loan contract. ……
It should be noted that in practice, some factors and counterparties do fabricate basic contracts and borrow money in the name of factoring. In this regard, the facts should be ascertained, and the nature of the contract should be reviewed and determined from the aspects of whether there is an underlying contract, whether the factor knows whether the underlying contract is fictitious, and the actual rights and obligations between the two parties. If it is indeed named factoring and actually lending, the cause of action should still be determined in accordance with the loan contract and the rights and obligations between the parties should be determined accordingly.
Opinions of Tianjin Local Financial Supervision and Administration Bureau, Tianjin Municipal High Court, Tianjin Branch of Chinese Bank, and Tianjin Banking and Insurance Regulatory Bureau on Further Optimizing the Financial Business Environment (Tianjin Financial Bureau [2019] No. 37)
For violations that circumvent financial supervision and cover up financial risks in the name of financial innovation, the validity of the contract and the rights and obligations of all parties shall be determined by the legal relationship actually constituted by them. Where contracts called financial leasing, factoring, pawns, etc., are actually legal relationships such as loans, they are to be handled in accordance with the actual legal relationships constituted, and the parties are prevented from raising the financing costs of the real economy in disguise by collecting management fees, consulting fees, service fees, security deposits, etc.
Minutes of the Adjudication Committee of the Tianjin Higher People's Court on Several Issues Concerning the Trial of Factoring Contract Dispute Cases (I) (Jingaofa [2014] No. 251)
A factoring contract refers to a contract signed between a creditor and a factor that stipulates that the current or future claims of accounts receivable arising from the underlying contracts concluded between the creditor and the debtor, such as the sale of goods, the provision of services, and the leasing of assets, shall be transferred to the factor, and the factor shall provide the creditor with at least one service, such as financing, sales account management, receivables collection, credit investigation and assessment, credit risk control and bad debt guarantee.
To constitute a factoring legal relationship, the following basic conditions should be met at the same time: (1) The factor must be a financial institution and a commercial factoring company that can carry out factoring business in accordance with the provisions of the state and approved by the relevant competent authorities; (2) The legal relationship of factoring shall be premised on the assignment of creditor's rights; (3) The factor and the creditor shall sign a written factoring contract; (4) The factor shall provide at least one of the following services: financing, sales account management, accounts receivable collection, credit investigation and assessment, credit risk control and bad debt guarantee.
If the contract signed between the factor and the creditor is called a factoring contract, and if it does not meet the constituent elements of the factoring contract after examination, it is actually another legal relationship, and it should be handled in accordance with the actual legal relationship. The legal relationship of factoring is different from the general loan relationship. The first source of repayment for factoring financing is the debtor's payment of accounts receivable, rather than the creditor's direct return of the factoring financing. The legal relationship of factoring is also different from the relationship of assignment of creditor's rights, and the factor accepts the accounts receivable paid by the debtor under the underlying contract, and after deducting the principal and interest of the factoring financing and related expenses, the balance should be returned to the creditor.
Guidelines of the People's Court of Shenzhen Qianhai Cooperation Zone on the Trial of Factoring Contract Dispute Cases in the Qianhai Shekou Free Trade Zone (for Trial Implementation) (22 December 2016)
Article 2 Factoring refers to the transfer of the creditor's current or future accounts receivable to the factor, and the factor provides the creditor with one or more of the following services under the premise of receiving the assigned receivables: (1) accounts receivable financing; (2) Accounts receivable management; (3) Collection of accounts receivable; (4) Sales account management; (5) Credit risk guarantees; (6) Other financial services that may be identified as factoring. Where a factoring contract is called, but does not actually constitute a legal relationship of factoring, it shall be handled in accordance with the legal relationship actually constituted by it.
Court judgment
The Shanghai Higher People's Court, the Shanghai First Intermediate People's Court and the Jinshan Court discussed the focus of the dispute as follows in the "This Court's Opinion" section of the civil judgment in this case:
Kingsoft Court's judgment opinion on the nature of the legal relationship of the underlying transaction, factoring business is based on the premise of the creditor's transfer of its accounts receivable claims, the factor provides comprehensive financial services integrating receivable collection, management, bad debt guarantee and financing, and the loan contract is a contract in which the borrower borrows from the lender, returns the loan at maturity and pays interest, that is, the biggest difference between the two is that the essence of the factoring legal relationship is the transfer of accounts receivable claims, involving the creditor, the debtor and the factoring tripartite entity. However, according to the actual operation process of the parties' court statements, when Jinghe Factoring Company signed a commercial factoring contract with Amerson's subsidiaries around the company, it only issued financing funds based on the invoice amount, and the parties did not verify and provide corresponding certificates for the corresponding accounts receivable basic contract, and the collection of accounts receivable was also responsible for Shanghai Lubang Insurance Agency Co., Ltd. Jinghe Factoring Company, as a factor, did not care whether the receivables agreed in the contract were true. Moreover, after the signing of the factoring contract, the factoring company only provided financing funds to the other party, so the commercial factoring contract involved in the case was only formal factoring. The financing agreement, framework agreement and commercial factoring contract submitted by Yisheng Company are mutually verified, which can prove that the essence of the commercial factoring contract is to provide a channel for Yisheng Company and Meichen Company to perform the financing agreement, and the company provides financing for Meichen Company and its subsidiaries, that is, the loan, and Meichen Company and its subsidiaries return the loan when due and pay the financing fee or interest as agreed, the two parties form a loan contract relationship, Yisheng Company is the lender, and the company that specifically signs the factoring contract with Jinghe Factoring Company is the borrower of the corresponding financing payment.
The Shanghai First Intermediate People's Court elaborated on the issue of the validity of the contract, although there were as many as 52 contracts involved in the case, they were all based on the financing agreement between Yisheng Company and Meichen Company, and the counterparties to the contract were all subsidiaries of Meichen Company, and did not provide loans to the unspecified public. Mason and its subsidiaries did not provide evidence that Yisheng was engaged in a recurring lending business. Mason confirmed that the competing loans were used for the insurance business of its subsidiaries and branches. The establishment of a private equity fund to raise and provide the financing funds involved in the case does not affect the validity of the loan contract in this case. Therefore, the existing evidence cannot prove that there are circumstances in the enterprise lending case in this case that should be found to be invalid or false private lending litigation provided for in Article 19 of the Judicial Interpretation on Private Lending. Meichen Company claimed that the loan contract involved in this case was invalid and could not be established.
The Shanghai Higher People's Court further elaborated on the validity of the contract that the parties signed a repurchase factoring contract to achieve the purpose of financing, but the parties did not have the intention to genuinely buy and sell the receivables, and the purpose of the agreed assignment of the receivables was to provide security for the future performance of the "repurchase" obligation. From the perspective of domestic and international factoring practice, the essence of factoring business is to provide financial integration. Unlike borrowing, the demander of funds either obtains financial integration by selling accounts receivable, or obtains funds through the transfer of accounts receivable and redeems them after a certain period of time. Judging from the relevant regulatory provisions of the factoring industry, the repurchase factoring business has not been prohibited, so Meichen Company claimed that the disputed repurchase factoring contract in this case was invalid and had no factual and legal basis, and this court did not accept it.
Source of the case
Second Instance Civil Judgment on Loan Contract Dispute between Yisheng Investment Management (Shanghai) Co., Ltd., Jinghe Commercial Factoring (Shenzhen) Co., Ltd., Meichen Insurance Brokers Group Co., Ltd. and Shanghai Lubang Insurance Agency Co., Ltd. [Shanghai No. 1 Intermediate People's Court (2018) Hu 01 Min Zhong No. 9866], Retrial Civil Ruling [Shanghai Higher People's Court (2018) Hu Min Shen No. 3099]
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On the basis of retrieving a large number of similar cases, Yunting lawyers summarize the relevant adjudication rules as follows for the reader's reference:
1. The underlying contractual relationship of accounts receivable does not really exist, and the commercial factoring contract signed accordingly does not have the basic characteristics of commercial factoring, and is actually a private lending contract relationship.
Case 1: The Suzhou Intermediate People's Court held in the Civil Judgment on the Dispute between Jiangsu Huacheng Commercial Factoring Co., Ltd. and Zhangjiagang Wohaohao Import and Export Co., Ltd. and Golden Tiger Contract [(2017) Su 05 Min Zhong No. 11232] that the factoring business is a comprehensive financial service integrating receivable collection, management, bad debt guarantee and financing on the premise that creditors transfer their receivables, involving tripartite entities (factors, creditors, debtors), Two legal relationships (the underlying contractual relationship of accounts receivable between creditors and debtors; the factoring relationship between factors and creditors on assignment of accounts receivable, collection of accounts receivable, management, guarantee of bad debts and financing). The establishment of a factoring contract shall be premised on the basis of a legally valid underlying contract. In this case, although Huacheng Factoring Company and Wohaohao Company signed the "Domestic Factoring Business Contract", Zhang Jun, as the debtor, was the deputy manager of Huacheng Factoring Company, and Zhang Jun's purchase of wood from Wohaohao Company produced a basic contractual relationship of accounts receivable, but the timber was actually controlled by Huacheng Factoring Company and disposed of by Huacheng Factoring Company, and Huacheng Factoring Company and Wohaohao Company both agreed to convert the disposal money of the wood into the principal and interest owed, so it can be seen that The basic contractual relationship of the accounts receivable between Wo good company and Zhang Jun does not really exist, the true intention of Huacheng Factoring Company and Wo Good Company should be a pledge loan, Huacheng Factoring Company is the lender, and Wo Good Good Company is the borrower, and the case should be handled according to the actual legal relationship between the two parties, that is, the private lending relationship.
2. The name of the lack of accounts receivable is a commercial factoring contract, which does not have the legal characteristics of a commercial factoring contract, and the dispute arising from the commercial factoring contract is actually a private lending dispute.
Case 2: The Intermediate People's Court of Shenzhen Municipality, Guangdong Province, held in the Second Instance Civil Judgment [(2017) Yue 03 Min Zhong No. 9955] of the Private Lending Dispute between Shenzhen Qianhai Fuhai Rongtong Factoring Co., Ltd. and Ningde Marine Technology Development Co., Ltd. and Chen Shengping [(2017) Yue 03 Min Zhong No. 9955] that the factoring business is a comprehensive service integrating receivable collection, management, bad debt guarantee and financing on the premise that creditors transfer their accounts receivable claims. The essence of the legal relationship of factoring is the assignment of claims on accounts receivable, the factoring contract involves different legal relationships between the factor and the creditor, the factor and the debtor, the basic contract between the creditor and the debtor is the premise for the establishment of the factoring, and the transfer of accounts receivable between the creditor and the factor is the core of the factoring relationship. In this case, although the Commercial Factoring Contract signed by Fuhai Company and Ocean Company, the guarantor involved in the case and E-Poly Company was called a factoring contract, the evidence submitted by Fuhai Company in this case did not show that the Marine Company as a creditor and the debtor had specific underlying contracts and accounts receivable, and the above contract did not in fact have the legal characteristics of a factoring contract, so this court could not determine that the contractual nature of the Commercial Factoring Contract involved in the case was a factoring contract, but a lending contract, and the nature of the case should be a private lending dispute. The intention of the loan contract between Fuhai Company and Ocean Company is true, the content does not violate the mandatory provisions of laws and administrative regulations, and should be confirmed as valid, and the parties should perform their respective obligations.