Do you have any outstanding credit collection in China? Rely on Invenium!
Credit collection in China has always been particularly complex and the assistance request from exporting companies has tremendously grown in consideration of the role played by the Chinese economy on the world stage.
First of all it is necessary to determine the legal nature of the company, its shareholding structure and if there are investments by the Government, to provide with a credit collection strategy.
This latter information is particularly important for understanding the creditworthiness and ability to meet its obligations in the event of legal action. Often in China, in fact, payment of a receivable is more a matter of honour than compliance with the contractual provisions. In China, therefore, due to the complexity of the legal system, it is particularly appropriate to follow an out-of-court credit collection strategy.
The action starts by sending a “notice to comply” followed by a direct visit to the debtor by a lawyer who will gradually seek to increase the pressure, making the debtor feel responsible. In China, the threat of initiating legal action is often sufficient to obtain payment. A lawsuit against one’s company can sometimes be perceived as an insult to the honour of a person.
Legal proceedings start with an application to Court of jurisdiction. The application must contain the request, statement of facts and legal elements constituting the reasons for the request, as well as the main evidence to be used.
The Court examines the application and the documents filed and assess whether or not the case is grounded. If so, the application is notified to the defendant who has 30 days to file a statement of defence.
The main problem in China, however, is that the judge has broad powers in conducting the proceedings, which are characterized by significant informality and is very dissimilar to western standards. Precisely for this reason out-of-court action is highly recommended. Rely on a professional credit collection agency focused on the Chinese country as Invenium.