News & Journal
Jin Mao Law Firm was invited by the Factors Chain International (FCI) to write an article on the Influence of the Civil Code on China’s Factoring Industry

Factors Chain International (FCI) was established in 1968 and headquartered in Amsterdam, the Netherlands. It is an open multinational non-governmental membership organization with the participation of factoring companies and banks in various countries around the world. With close to 400 member companies in 90 countries/regions, it is currently the largest and most influential international factoring organization in the world, providing a unique network for cross-border factoring cooperation, and its member transactions represent nearly 90% of the world’s international correspondent factoring volume.

The promulgation of the "Civil Code of the People's Republic of China" included the Factoring Contract as a separate well-known chapter in the contract part for the first time. China's factoring industry has achieved a historical breakthrough with statute law to follow, and the development of the factoring industry now has a legislative solid foundation. Practitioners in the global factoring industry have also expressed much concern about this.

Recently, Jin Mao Law Firm’s partner Wan Bo (Frank) and attorney Xu Bingqing (Scarlett) were invited by FCI to an article on the Influence of the Civil Code on China’s Factoring Industry which has been published in the August issue of FCI IN-SIGHT Newsletter.

The article lists and analyzes the advantages for factors after the implementation of the "Civil Code". For instance, in the case of a factor in good faith, even if the accounts receivable is forged, factors are entitled to claim full principal and interest from debtors. It also restricts the parties to the underlying transaction contract from modifying and terminating the contract without justifiable reasons, otherwise the adverse effects will not be effective for the factors. At the same time, in addition to the Factoring Contract chapter, the Civil Code embodies the rules for the establishment of a unified registration system in many articles, such as Article 414 of the Civil Code concerning the priority rule for double mortgage of the same property and provision of Article 745 "The lessor's ownership of the leased property shall not be against bona fide third party without registration". These clauses all reflect China's efforts to integrate China's secured transaction rules with international rules such as Model Law on Secured Transactions.

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