Introduction to the PRC's Collateral Registration System for Movable Property Financing

[Michael's Chinese Law Series-Compliance & Dispute Resolution]

China has established a unified collateral registration system to enhance the transparency and efficiency of movable property financing. The People's Bank of China's Credit Reference Center launched the system in 2007, initially focusing on the registration of accounts receivable pledges and transfers, as well as financial leases. This system has been continuously expanded to include a broader range of movable property and rights, such as equipment, raw materials, semi-finished products, and products. Since January 1, 2021, the system has been providing nationwide unified registration and inquiry services for movable property and rights, as mandated by the Civil Code and the Regulations on the Implementation of Unified Registration of Movable Property and Rights Guarantees.

Features of the Registration System

The registration system aims to inform other parties about existing security rights on movable property. It allows multiple security rights to be registered on the same property, providing a clear picture of the property's encumbrances. The registration process is straightforward, requiring only basic information about the parties involved, the collateral, and the duration of the registration. Importantly, the system does not require the submission of the underlying transaction contracts. The Credit Reference Center is responsible for objectively recording and maintaining the information submitted, ensuring the system's security and proper functioning, without conducting substantive reviews of the content.

Legal Responsibilities and Consequences

The parties involved in the registration process are responsible for the truthfulness, completeness, and legality of the information provided. Falsifying materials or causing harm to others by providing false information can result in legal liability. The system also offers functionalities for initial registration, amendments, extensions, objections, and cancellations, ensuring that all stakeholders can keep their registrations up-to-date.

Transition and User Types

The system distinguishes between regular and institutional users, with the latter requiring on-site verification. Institutional users can perform registrations, amendments, and cancellations, while regular users are limited to inquiries. Upon successful registration, a unique registration number and a modification code are generated, which are essential for any subsequent changes to the registered collateral.

Other Collateral Types and Registration Processes

The system also details the registration processes for other types of collateral, such as motor vehicles, aircraft, and ships. For instance, motor vehicle mortgages must be registered with the local vehicle management authority, while aircraft and ship mortgages require submission of specific documents to the relevant civil aviation or maritime authorities. These processes ensure that the rights and interests of all parties involved are legally protected and publicly recorded.

Practical Advice

As a practical advice for stakeholders, it is important to register collateral to protect interests and prevent disputes promptly after establishing security rights to ensure their legally effectiveness and enforceability.

(Michael Chen, JunHe LLP Shanghai)