1. Background of the problem
When the debtor unreasonably disposes of the debt, which affects the realization of the creditor's interests, the creditor can exercise the right of avoidance within a certain time limit. The right of revocation system is an important measure to ensure the performance of contractual debts and safeguard the interests of creditors, provides a legal basis for creditors to urge debtors to earnestly perform their contractual obligations, and is of great significance to promote the formation of a good credit system and business ethics in the market. This article will focus on the relevant conditions and procedures for creditors to exercise their right of avoidance.
2. Conditions of Exercise
(1) The creditor's claim against the debtor is legal and valid. The claim must have been established before the debtor carried out the act of disposition. If the debtor's act of disposing of the property occurs before the creditor's claim against the debtor is established, the creditor has no right of revocation;
(2) The debtor has carried out the act of disposing of property. Property disposition includes: disposing of property rights and interests without compensation, such as waiving their creditor's rights, waiving their creditor's rights and guarantees, transferring property without compensation, or maliciously extending the performance period of their due creditor's rights, transferring property at an obviously unreasonably low price, accepting another person's property at an obviously unreasonably high price, or providing security for the debts of others;
(3) The property act affects the realization of the creditor's creditor's rights. The effect is mainly that after the act of disposing of property, the debtor's remaining other property is insufficient to pay off the debts owed to the creditor.
(4) The creditor's exercise of the right of revocation shall be limited to the creditor's rights. In order to protect the debtor's right to dispose of its own property, it is necessary to set the scope of the creditor's right of avoidance. In view of the purpose of the establishment of the avoidance system, the creditor can only file a lawsuit for revocation on the basis of the creditor's right he enjoys, and the scope of the property disposal act of revocation can only extend to the scope of the creditor's right.
(5) The creditor shall exercise the right of revocation within the exclusion period.
3. Exercise Procedures
The parties concerned shall file a lawsuit for revocation with the people's court at the place where the defendant is domiciled within the exclusion period prescribed by law.
Fourth, related cases
Case 1: The standard for whether the debtor's external security can be revoked when the debtor is insolvent
The gist of the adjudication: The creditor's right of avoidance, as a preservation system for creditor's rights, aims to reasonably maintain the debtor's liability property, so as to ensure that the creditor's claim can be realized. Where the debtor's liabilities exceed the assets and the debtor still provides a large amount of security to the outside world, affecting the realization of the creditor's creditor's rights, the people's court shall support the creditor's request to revoke the above-mentioned security act if the debtor and its counterparty cannot explain the necessity and legitimacy of the guarantee, nor the reasonableness of the security decision-making process and transaction process.
Basic facts of the case: XX Fund Company (hereinafter referred to as the Fund Company) is the legal creditor of Nanjing XX Co., Ltd. (hereinafter referred to as XX Company).
During the period from March 18, 2011 to April 18, 2011, the third party, Mr. Zhou, received a total of eight claims from Company A and Company B, and the company was the guarantor of one of the debts, and on March 28, 2011 and April 18, 2011, issued letters of guarantee for the remaining seven claims, providing joint and several liability guarantees for the principal and interest of these eight claims, with a total principal of RMB 223,575,124 and USD 900,000. And the above guarantees are free of charge.
On July 25, 2012, Zhou, as a creditor, filed an application for bankruptcy liquidation of a certain company with the court. On September 13, 2012, the court made a civil ruling and accepted Zhou's application for bankruptcy liquidation of a certain company. On March 4, 2013, the first creditors' meeting of a certain company was held. At that meeting, the fund company raised objections to Zhou's creditor's rights, arguing that Zhou's creditor's rights were colluded with the company, and made an appointment to check the creditor's rights information on March 7, 2013. On March 7, 2013, the fund company's representatives Wang and Teng began to check the creditor's rights information. On August 19, 2013, the bankruptcy administrator of a certain company publicized the results of the review of creditor's rights, stating that the amount of claims declared by the fund company was RMB 294,954,607.91, and the amount of claims approved was RMB 238,066,122.58. On September 16, 2013, the fund company submitted to the court the "Objection to the Verification of Bankruptcy Claims of Nanjing XX Co., Ltd.", raising objections to the claims of Zhou XX approved by the administrator.
On March 7, 2014, the fund company filed a lawsuit with the court with XX as the defendant and Zhou, Company A and Company B as the third parties. The fund company claimed that in order to evade the performance of its obligations to the plaintiff and other creditors, the debtor XX Company transferred property to the related party free of charge by providing security for the creditor's rights obtained by a third party such as Zhou XX at a low price or no consideration, and hollowed out the assets, resulting in the original creditors being unable to obtain or fully repaid, causing serious damage to the creditors. Through the hands of Zhou Moumou and others, a certain company obtained a huge amount of creditor's rights at an extremely low price, and then actively cooperated with the guarantee of the creditor's rights, trying to distribute the property as a creditor. Its behavior is to evade the enforcement of other creditors and infringe on the legitimate rights and interests of other creditors by means of bankruptcy. Therefore, the court was requested to order the revocation of the company's eight acts of malicious guarantee in 2011.
On October 17, 2017, the Intermediate People's Court of Nanjing Municipality, Jiangsu Province, rendered a civil judgment rejecting the plaintiff's claim of the fund company. After the judgment was pronounced, the fund company was dissatisfied with the first-instance judgment and appealed. On January 16, 2020, the Jiangsu Provincial High People's Court rendered a civil judgment: (1) to revoke the civil judgment of the Intermediate People's Court of Nanjing Municipality, Jiangsu Province, (2) to revoke the six guarantee letters issued by Nanjing XX Co., Ltd. to Company B on March 28, 2011, and (3) to reject the other litigation claims of the fund company.
Reasons for the adjudication: First, the fund company may request the revocation of the act of providing guarantee for the debts of others. The legislative purpose of the creditor's right of avoidance is to maintain the debtor's liability property in an appropriate state so as to ensure that the creditor's claim can be realized. Therefore, it cannot be determined that the acts of the creditor that can request rescission are limited to the circumstances provided for in Article 74 of the Contract Law, and the debtor's act can become the object of the creditor's right of revocation as long as it reduces the liability property and damages the creditor's creditor's claim. Article 18 of the Interpretation (II) of the Supreme People's Court on Several Issues Concerning the Application of the Contract Law of the People's Republic of China provides an interpretation of the legal provisions in accordance with the legislative purpose of the creditor's right of revocation system. It is not possible for laws and judicial interpretations to enumerate all the specific circumstances in which the debtor prejudices the creditor's claim. The debtor provides a guarantee for the debts of others, which actually increases the debt burden for itself and has the legal effect of reducing the property, and the creditor may request the people's court to revoke it in accordance with the provisions of Article 74 of the Contract Law of the People's Republic of China.
Second, the guarantee provided by a certain company for the debts of others harmed the creditor's creditor's rights. Damage to creditors means that the debtor's conduct has put it in a position where it is unable to pay its debts, or the debtor has become no longer able to pay its debts completely, and the debtor's conduct has further reduced its ability to pay its debts. According to calculations, the assets of a certain company in this case were less than 1.2 billion yuan on March 28, 2011, and the liabilities exceeded 1.7 billion yuan, and the liabilities at that time had exceeded the assets. Therefore, when the company provided the guarantee involved in the case on March 28, 2011, it no longer had sufficient assets to pay off the debts, but still provided the guarantee to the outside world, so that the amount of repayment by the creditors was reduced, and the damage caused to all creditors should be revoked.
Third, Company XX, Company B, and Zhou XX were not in good faith. On the one hand, on March 28, 2011, the company had liabilities of more than 1.7 billion yuan, and its assets were less than 1.2 billion yuan, and its property was obviously insufficient to pay off all the debts. Therefore, it was determined that it should have known that providing the guarantee for the debts of others involved in the case would damage the creditor's creditor's rights. On the other hand, Company B and Zhou should have known that Company B's provision of the guarantee involved in the case would damage the creditor's rights of the creditors of the Company, and first, Company B and Zhou did not explain to the people's court the process of Company XX providing guarantees for the debts of others. Company B refused to appear in court to participate in the litigation without justifiable reasons after being summoned by the people's court, and did not explain the process of guaranteeing the guarantee. Zhou also did not explain to the people's court the process of providing guarantees for Company B and Zhou. The company claimed that it provided the guarantee to cooperate with the restructuring of the company, but it did not submit evidence to prove it. Second, Company B and Zhou should know that it is very likely that Company B will need to bear debts after providing guarantees. Company B and Zhou Moumou knew that the creditor's rights they purchased were non-performing debts, and the original debtor was unable to pay off the debts, and the company provided a guarantee, and there was a high possibility that they would need to be liable. Third, there are unreasonable aspects in the process of providing guarantee to Company B. According to Zhou's claim, Company B obtained the creditor's rights through auction on March 14, 2011. However, without receiving any written notice, a certain company issued a letter of guarantee to company B to provide a guarantee. XX Company asserted that it had received an oral notice.
The court held that it was obviously unreasonable for a certain company to provide a guarantee for hundreds of millions of yuan of creditor's rights without receiving a written notice. In addition, Zhou Moumou did not submit evidence that Company B obtained the creditor's rights. Fourth, there was unreasonableness in the transfer of creditor's rights between Company B and Zhou. First of all, in the first and second instances, Zhou did not submit evidence that Company B paid the transfer of creditor's rights to Guangdong Company C, nor did he submit evidence that he paid the transfer of creditor's rights to Company B. The "Creditor's Rights Transfer Agreement" signed by Zhou Moumou and Company B did not record the amount of the creditor's rights transfer, but only recorded that Zhou Moumou should pay the balance of the transfer, which was obviously unreasonable. Second, Zhou's statement on the transaction method of his transfer of claims from Company B is also obviously unreasonable. Zhou's statement in the first instance stated that the price for which Company B obtained the creditor's rights involved in the case through auction was RMB 60.5 million, Company B paid a deposit of RMB 10 million to the auction company, and Zhou remitted RMB 50.5 million and commissions to Guangdong Company C. According to Zhou's statement, after paying a deposit of RMB 10 million, Company B obtained non-performing debts through auction. After Company XX provided a new guarantee for these non-performing debts, Company B transferred them to Zhou, and Zhou did not pay the consideration to Company B, but only paid the remaining RMB 50.5 million to Guangdong Company C, and Company B did not make a profit, which was obviously not in line with commercial practice. Comprehensively considering that there are many irrationalities in the transaction process of Company B and Zhou's acquisition of non-performing debts, and the process of Company XX providing guarantees, it can be determined that Company B and Zhou should have known that the provision of guarantees and guarantees by Company XX for the debts of others would damage the creditors' claims.
To sum up, XX Company issued 6 letters of guarantee on March 28, 2011 and 1 letter of guarantee on April 18, 2011 to provide guarantee for the debts of others, which harmed the creditor's rights of XX Company, and XX Company, Company B, and Zhou XX should have known about this situation, which met the requirements of the creditor's right of revocation.
In addition, according to the second paragraph of Article 74 of the Contract Law of the People's Republic of China, the scope of the exercise of the right of avoidance is limited to the creditor's claim. Therefore, the scope of the fund company's request for revocation should not exceed the amount of its claims. The amount of the fund company's creditor's rights approved by the bankruptcy administrator of a certain company is RMB 238,066,122.58. According to the approval of the bankruptcy administrator of the company, the total amount of the seven claims provided by the company on March 28 and April 18, 2011 amounted to RMB 280,171,375.51, which exceeded the amount of the fund company's claims and should not be revoked in full. However, the total amount of claims guaranteed by the six letters of guarantee issued by the company on March 28, 2011 is RMB 238,140,794.64, which is very close to the amount of the fund company's claims, and the six letters of guarantee are inseparable legal acts and should be revoked as a whole. Accordingly, the letter of guarantee issued by XX Company on April 18, 2011 should not be revoked.
Case 2: A third party pays off the debtor's individual debts on behalf of the debtor's accounts receivable, which belongs to the scope of revocation of individual repayment of bankruptcy claims
The gist of the adjudication: If a third party uses the accounts payable payable to the debtor for individual repayment on behalf of the debtor in accordance with the prior agreement within six months before the people's court accepts the bankruptcy application, causing damage to the repayment interests of other creditors, the administrator requests the people's court to revoke it in accordance with Article 32 of the Enterprise Bankruptcy Law of the People's Republic of China, and the people's court shall support it.
Basic facts of the case: The administrator of a metal products company in Huangshan City (hereinafter referred to as a metal products company) claimed that on March 15, 2019, the People's Court of Xiuning County, Anhui Province ruled to accept the bankruptcy liquidation application of a certain company against a metal products company, and appointed a law firm in Anhui as the administrator on March 20, 2019. In the process of liquidation, the administrator found that the defendant Huangshan City Tourist Automobile Co., Ltd. (hereinafter referred to as a tourist automobile company) transferred the rent of 323,400 yuan payable to a metal products company to Zhang and Shao on October 11, 2018. In accordance with the provisions of article 32 of the Bankruptcy Law, the current administrator filed a revocation lawsuit with the court.
Zhang and Shao argued that on November 28, 2017, a metal products company signed a "Shareholder Cooperation Agreement" with Zhang and Shao, stipulating that the three parties would jointly invest in the establishment of Huangshan Company C. On December 2, 2017, a metal products company and a tourist car company issued a letter of commitment to Zhang and Shao, and a metal products company promised to use the rent of a tourist car company as a performance guarantee, and if a metal products company failed to perform in accordance with the cooperation agreement, the tourist car company would directly pay the rent to Zhang and Shao as compensation for losses. Therefore, the payment made by a tourist bus company to fulfill the letter of commitment issued by it and a metal products company, and the act was legal and valid. In addition, when a tourist bus company made the payment, a metal products company still had a large area of land use rights and real estate in its name, and there was no evidence to prove that the metal products company was insolvent at that time, so the manager had no right to request revocation. In summary, it is requested that the plaintiff's petition be dismissed in accordance with law.
A tourist car company argued that, according to the Shareholders' Cooperation Agreement, a tourist bus company should pay compensation to Zhang and Shao until March 5, 2018 at the latest. However, due to financial reasons, a tourist car company delayed payment to October 11, 2018, and the actual payment time of a tourist car company cannot be regarded as the time when a metal products company repays its debts. A metal products company agreed to repay much earlier than six months before the court accepted the bankruptcy application, and should not be revoked according to law. In addition, there is no evidence to prove that a metal products company was insolvent or obviously insolvent when a tourist car company paid compensation in 2018. In summary, it is requested to dismiss the litigation claim of a metal products company.
After trial, the court ascertained that on November 28, 2017, a metal products company signed a "Shareholder Cooperation Agreement" with Zhang and Shao, intending to invest in the establishment of a company in Huangshan City. On December 2, 2017, a tourist car company issued a letter of commitment to Zhang and Shao, with a total of 999,000 yuan of three-year rent payable by a tourist car company to a metal products company as a performance guarantee. A metal products company, Zhang Moumou, and Shao Moumou signed and confirmed on the letter of commitment. Due to the failure of a metal products company to perform the "Shareholder Cooperation Agreement", Zhang and Shao claimed compensation from a tourist car company with a letter of commitment. On October 11, 2018, a tourist car company paid the rent for 2018 to Zhang Moumou and Shao Moumou 161,700 yuan each in accordance with the letter of commitment, totaling 323,400 yuan. On March 15, 2019, the People's Court of Xiuning County, Anhui Province ruled to accept the bankruptcy liquidation case of a metal products company applied by a certain company. The administrator found that the time for a certain tourist car company to pay compensation to Zhang and Shao was within six months before the court accepted the bankruptcy liquidation, so it appealed to the court to revoke the aforesaid individual liquidation.
On December 29, 2020, the Xiuning County People's Court of Anhui Province made a civil judgment: 1. Revoke the payment of 323,400 yuan to Zhang and Shao on October 11, 2018 by a tourist car company. 2. Zhang XX and Shao XX returned 323,400 yuan to the manager of a metal products company within 20 days after the judgment in this case took effect, of which Zhang XX returned 161,700 yuan and Shao XX returned 161,700 yuan. 3. Reject other litigation claims of the manager of a metal products company. After the verdict was announced, Zhang appealed. On March 2, 2021, the Intermediate People's Court of Huangshan City, Anhui Province, rendered a civil judgment, rejecting the appeal and upholding the original judgment.
Reason for the adjudication: The effective judgment of the court held that the focus of the dispute in this case was: whether the payment behavior of a tourist car company to Zhang and Shao met the revocation requirements of Article 32 of the Enterprise Bankruptcy Law of the People's Republic of China.
The rent involved in the case was the accounts receivable of a metal products company, and a tourist bus company used the rent that should have been paid to a metal products company to compensate for the losses of Zhang and Shao in accordance with the commitment letter. On March 15, 2019, the Xiuning County People's Court ruled to accept the bankruptcy liquidation case of a metal products company, and a tourist bus company paid Zhang and Shao on October 11, 2018. The purpose of the establishment of the bankruptcy avoidance system is to safeguard the overall interests of creditors and achieve fair repayment. The act of a tourist bus company to pay according to the letter of commitment resulted in the rent that should have been recovered by a metal products company being used for individual repayment, and the repayment failed to benefit the property of a metal products company and caused damage to the repayment interests of other creditors. In summary, the application of the manager of a metal products company to revoke the individual liquidation act is in accordance with the law and should be supported.
Case 3: Determination and handling of the creditor's exercise of the right of revocation on the grounds that the debtor has not repaid the debts for the shareholders without the company's resolution procedure
The gist of the adjudication: 1. If the company uses its property to pay off the debts for the shareholders, and the transferee of the property has paid the property consideration by eliminating the original creditor's rights, and the company's repayment behavior does not belong to the statutory situation of disposing of property rights and interests without compensation, and if the transferee of the property does not know or cannot know that the act affects the realization of the creditor's rights of the company, the creditor exercises the right of revocation, and the people's court does not support it.
2. If the company pays off the debts for the shareholders without the resolution procedure, and the counterparty fails to conduct a reasonable review of the company's resolution procedure, the repayment will not be effective for the company, but the company or other shareholders have the right to choose whether to recognize, and the right to claim that it is not effective shall belong to the company or other shareholders, and the company's creditors have no right to subrogate.
Basic facts of the case: Shenzhen XX Data Technology Co., Ltd. (hereinafter referred to as a data technology company) alleged: 1. Revoke the act of XX Electrical Appliance (Shenzhen) Co., Ltd. (hereinafter referred to as XX Electrical Appliance Company) to transfer the real estate of No. X1 and X2 of a park in Binhu District, Wuxi City to Wuxi XX New Material Technology Co., Ltd. (hereinafter referred to as XX New Material Company); An electrical appliance company and a new material company were ordered to change and register the above-mentioned immovable property in the name of an electrical appliance company.
After trial, the court ascertained that on July 5, 2018, an electrical appliance company and a data technology company signed a "Material Procurement Agreement", stipulating that a data technology company would carry out the procurement of specific types of materials in accordance with the material suppliers designated by an electrical appliance company. On the same day, You Moumou, deputy general manager and director of an electrical company, signed a "Letter of Guarantee" to a data technology company, stating that he was willing to provide joint and several liability guarantee to an electrical company. On December 9, 2020, the court rendered a judgment on the case: 1. The electrical appliance company repaid the payment of 18,825,702.84 yuan to the data technology company and paid liquidated damages;
On October 20, 2018, Huang, the legal representative of an electrical appliance company, signed two "Wuxi Stock Housing Sales Contracts" with a new material company on behalf of an electrical appliance company, respectively stipulating that an electrical appliance company would sell the house No. X1 in a park in Binhu District, Wuxi City to a new material company at a price of 3 million yuan, and sell the house No. X2 in a park in Binhu District, Wuxi City at a price of 3.12 million yuan. The above two houses were later transferred and registered under the name of a new material company on October 24, 2018.
On June 21, 2019, Yan Moumou, the legal representative of a new materials company, filed a lawsuit with the court, requesting that You Moumou be ordered to repay the principal of RMB 3,861,444.47 (HK $10 million deducted You Moumou's loan of RMB 5,273,855.53 with the real estate of No. X1 and X2 in a park in Binhu District, Wuxi City). The trial of the case ascertained that Yan Moumou agreed that You Moumou would use the real estate of No. X2 of a park in Binhu District, Wuxi City, and the real estate of No. X1 of a park in Binhu District, Wuxi City, under the name of his company. You Moumou stated: In 2018, in order to repay the debts of the case, he had transferred the real estate of No. X1 and X2 of a park in Binhu District, Wuxi City to a new material company, and the new material company did not pay the house payment, and the two parties agreed to offset the debt of the case at that time. Later, on April 8, 2020, the court ruled that You Moumou should repay the principal of the loan of 3,861,444.47 yuan and interest.
In this case, both an electrical appliance company and a new material company failed to provide evidence that the above-mentioned transfer of immovable property was resolved by the corporate authority of an electrical appliance company.
On December 9, 2021, the Binhu District People's Court of Wuxi City, Jiangsu Province, rendered a civil judgment rejecting the litigation claim of a data technology company. After the judgment was pronounced, a data technology company appealed against the original judgment. On March 22, 2022, the Intermediate People's Court of Wuxi Municipality, Jiangsu Province, rendered a civil judgment: rejecting the appeal and upholding the original judgment.
Reason for the adjudication: Although an electrical appliance company and a new material company signed a real estate transfer contract, combined with the private lending lawsuit between Yan Moumou (the legal representative of a new material company) and You Moumou (the deputy general manager and director of an electrical appliance company) and related evidence, there was no real transaction between an electrical appliance company and a new material company in the sale of houses, but an electrical appliance company used its own real estate to offset the loan owed by You Moumou to Yan Moumou, and Yan Moumou designated a new material company to receive the real estate. Therefore, there was no expression of intent to buy and sell real estate between an electrical appliance company and a new material company, and there was no act of transferring real estate for free or at a low price, and the revocation claim of a data technology company could not be established.
Article 7 of the Interpretation of the Supreme People's Court on the Application of <中华人民共和国民法典>the Relevant Guarantee System stipulates that if the legal representative of a company violates the provisions of the Company Law on the procedures for the resolution of a company's external guarantee and exceeds his authority to enter into a guarantee contract with the counterparty on behalf of the company, the guarantee contract shall not be effective against the company if the counterparty is not in good faith. The legal consequence of invalidity is caused by the lack of an expression of intent by the company and the fact that the counterparty does not constitute a bona fide acquisition. Although the mortgage in this case can be compared with the above-mentioned guarantee act, although it has not been resolved by the shareholders' meeting, its legal consequences are not invalid, but it is not effective against an electrical company, and an electrical company or its shareholders have the right to choose whether to recognize it, and the right should be attributed to an electrical company or its shareholders, and a data technology company, as a creditor of an electrical company, has no right to claim invalidity by subrogation.
5. Analysis and suggestions
When the creditor knows that the debtor has carried out an act of disposing of property that may infringe on its creditor's rights, it should pay attention to the exclusion period for exercising the right of revocation to avoid the inability to revoke due to the expiration of the exclusion period, that is, it should exercise it within one year from the date on which it knows or should know the reasons for revocation, and if it does not exercise the right of revocation within five years from the date of the debtor's act, the right of revocation shall be extinguished. At the same time, the right of avoidance should also be asserted within the scope of its creditor's rights, and some courts beyond the scope of its creditor's rights will not support it.
When it comes to the repayment of the company, if the transferee of the property does not know or cannot know that the act affects the realization of the creditor's rights of the company, the creditor cannot request to exercise the right of revocation.
In short, creditors should pay attention to the relevant conditions for exercising the right of avoidance when exercising the right of avoidance, and file a lawsuit for the right of avoidance in a timely manner.
6. Relevant Laws
Civil Code of the People's Republic of China
Article 538:Where the debtor disposes of property rights and interests without compensation by waiving its creditor's rights, waiving the guarantee of creditor's rights, transferring property without compensation, or maliciously extending the time limit for the performance of its due creditor's rights, affecting the realization of the creditor's creditor's rights, the creditor may request the people's court to revoke the debtor's acts.
Article 539:Where the debtor transfers property at an obviously unreasonably low price, accepts the property of another person at an obviously unreasonable high price, or provides security for the debts of others, affecting the realization of the creditor's creditor's rights, and the debtor's counterpart knows or should know about the situation, the creditor may request the people's court to revoke the debtor's act.
Article 540:The scope of exercise of the right of revocation is limited to the creditor's creditor's rights. The necessary expenses for the creditor to exercise the right of avoidance shall be borne by the debtor.
Article 541:The right of revocation shall be exercised within one year from the date on which the creditor knows or should know the reasons for revocation. If the right of avoidance is not exercised within five years from the date of the debtor's act, the right of avoidance shall be extinguished.
Article 542:Where the debtor's act affecting the realization of the creditor's rights is revoked, it shall not be legally binding from the beginning.