How can the court in China apply pressure to help you recover money?
You won the court case but the loser hasn’t paid you the court appointed damages. What pressure can the court in China apply to help you recover funds?
Have you won a court case in China recently but the losing party won’t pay the court appointed damages? If yes, then this article is for you!
If the losing party fails to execute the verdict from the court, the plaintiff or winning party can apply to have enforcement by the court of the first instance.
What pressure can the court in China apply?
According to the litigation and enforcement in China Law, the enforcement judge issues an enforcement notice to the non-complying party, requesting it to respect and perform the judgment within a designated period time. If the party fails to perform the judgment within the designated period of time, the court will take compulsory measures to enforce it. The measures are as follows:
- Requiring the non-performing party to report its asset status.
- Checking the non-performing party's bank accounts.
- Freezing and transferring the deposits of the non-performing party.
- Sealing, freezing, auctioning and selling the assets of the non-performing party.
- Searching the residence of the non-performing party's home or the other places where the assets may be hidden.
- Prohibiting the legal representative of the non-performing party from leaving China.
- Recording the non-performance in a credit-ranking system and disclosing this information to the public.
The entity may also be placed on a blacklist. More on that below.
What happens if the court can’t find any assets?
If the court found no record of assets for the losing party and the company has no money or stopped operating, the winning party can sue the shareholder/s to bear the loss. The court will issue a document to prove that the company had no money so the winning party has legitimate ground to sue the shareholder and add on the enforcement procedure. But it needs to be proven to the court that the shareholder did not pay any of the registered capital of the company. If the registered capital is not paid in full or if the record shows that the shareholder did not pay the capital. It means, if the company is being sued and cannot pay the charges or debts, the shareholder is obliged to pay. The winning party can provide evidence of the target company ownership from the Commercial Registration Administrative and the Shareholder’s ID.
If the losing party and the shareholder have no money or assets to pay the court appointed damages. Then the court will automatically blacklist them and the blacklisted person or company will suffer consequences in their personal life as follows:
- Can’t get a loan from the bank
- Prohibited to travel abroad
- Can't take first class train or plane
- They can’t have their child go to regular school
- Can't buy properties like house, cars and etc.,
- Insurance will be hard/impossible to organize
- Their names can be easily found in black list record in the public and it will not be removed until they pay for the money they owe.
- Suppliers/customers/business partners, friends can see the public blacklist
(if they speak Chinese)
However, if the court doesn’t initially support the winning party's claims to include the shareholders personally responsible in the enforcement procedure, then the winning party can file an appeal to the higher court and will perhaps get a different result. And if the winning party wins in the higher court, the targeted shareholder shall be borne the court fees of the first instance and forced to pay the verdict.
About the Author: Michael J. Bellamy
Originally from Upstate New York, Mike moved to Asia in 1993 and is a China business advisor to both Fortune 500 companies and small businesses. Recognized as an expert on doing business in China, he has been interviewed by WSJ, CNBC, FT & Bloomberg.
A featured presenter on China issues at seminars, trade shows and corporate events across the globe.
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