The People’s Bank of China (PBOC) issued the newly revised Measures for Registration of Pledge of Accounts Receivable on 22 November 2019. The revised measures were implemented on 1 January 2020, upon which the former measures were repealed.
The PBOC stated that the revised measures have been adapted to the new circumstances and requirements for the development of the movable property financing business. In light of international best practice in modern movable asset security systems, the revisions affect the scope of application, registration agreements, registration terms, responsibilities and obligations, etc.
The revised measures focus on satisfying the demand of market entities for the establishment of an efficient, convenient and uniform movable asset security system, and enhancement of the availability of enterprise financing.
The main revisions include the following:
(1) The addition in the supplementary provisions of reference provisions for the registration of other movable property and rights guarantees, so as to satisfy the needs of market entities for registration of guarantee transactions pertaining to guarantee transactions of movable property and strengthen the positive guidance of various registration acts;
(2) The abolition of the requirement for the submission of registration agreements, enhancing registration efficiency;
(3) The reduction of the initial registration term and any renewed terms to a minimum of one month, providing greater flexibility and convenience in the choice of registration term;
(4) The addition of provisions on the responsibilities and obligations of the financing parties in the event of a legal dispute, specifying that the registering party bears the liability for ensuring the truthfulness of the information; and
(5) The revision or addition of other provisions addressing the names of the creditor and pledgee, de-registration deadline, cancellation of registration, authority for interpretation, etc., making the language clearer and more compliant.
One revision of particular significance is article 35, namely, “Where a rights holder carries out the registration of other movable asset and rights security on the registration publication system, matters shall be handled with reference to these measures. For the purposes of these measures, the term ‘security created over movable asset and rights’ means the various transaction forms of a security nature created over movable assets and rights as agreed by the parties, and provided for the purpose of repaying a debt or otherwise performing the debt obligation, including but not limited to financial leasing, deposit pledges, inventory and warehouse receipt pledges, etc., unless otherwise provided in laws or regulations.”
This new provision satisfies the demand of market entities for voluntary registration of movable asset security transactions, and strengthens the positive guidance of various registration acts.
The author has a certain familiarity with commercial security systems in cross-border financing security transactions of certain regions with well-developed offshore commercial systems, e.g., Hong Kong’s quick and concise charge registration procedure and transparent registration information are quite impressive.
In contrast, in the mainland’s security registration system there are a great number of registrars, and their registration procedures and requirements are not all consistent; even in terms of the registration procedure and the requirements for the submission of documents for the same type of collateral, the registration requirements of registrars in different regions and at different levels of the same system also
Furthermore, the security registration information of different registrars is incompatible, making it difficult to search information against a particular security provider of the security created over its movable asset. The entry into effect of the registration of security provided for financing usually serves as one of the conditions precedent for close of the financing, and if registration of the security cannot be completed in a timely manner, the efficiency of the close of the financing will be directly affected.
Fortunately, the competent authorities of the central government are also steadily pushing forward the reform of the commercial registration system. In terms of the convenience offered by the online registration of mortgages of movable assets, on 25 May 2018 the State Administration for Market Regulation (SAMR) launched the National Market Regulation Business System for the Registration of Mortgages of Movable Assets for trial operation. It launched the system in Beijing municipality, Liaoning province, Shanghai municipality, Jiangsu province, Zhejiang province, the Guangxi Zhuang Autonomous Region, Shaanxi province and Wuhan municipality on 31 August 2018, and from there launched it nationwide on 28 December 2018.
On 18 March 2019, the SAMR made the second revision to the Measures for the Registration of Mortgages of Movable Assets, and the same were implemented from 20 April 2019. They expressly provide that parties may carry out online the registration of the creation and modification, and the deregistration, of mortgages of movable assets through the National Market Regulation Business System for the Registration of Mortgages of Movable Assets. However, this system still has certain limitations, e.g., it does not include pledges of movable assets.
To promote the unified registration of movable asset security, on 28 April 2019, the PBOC and SAMR simultaneously launched pilot programmes for the unified registration of movable asset security in Beijing and Shanghai, entrusting the function of registering mortgages of four types of movable assets – including production equipment, raw materials, semi-finished products and products – originally handled by market regulatory authorities to the PBOC’s Credit Reference Centre, while expressly excluding aircraft, vessels, motor vehicles and other such movable assets that fall within the scope of registration of other statutory security registration authorities.
More than anything, the revised measures set out clear provisions, launching the uniform registration of movable asset security, an important step in improving the business environment. The provision to market entities of uniform, convenient and efficient registration, amendment, search, deregistration and other such services for movable asset security will be conducive to resolving the issues of the various diffuse systems for the registration of rights and interests in movable asset security, and the lack of uniformity in registration rules, and conducive to enhancing the convenience and availability of financial credit services.
Wu Jiejiang is a partner at Jingtian & Gongcheng