CHINA Law and Practice Contributed by: Yaxing Zhang, Bing San, Yi Cao and Jiahui Zhu, Han Kun Law Offices
Alternative Remedies If no enforceable assets are found for the judgment debtor through various inquiries, the assets under the name of a third party may be legally enforced, or the third party may be added as a judgment debtor to increase the likelihood of debt recovery. Generally, under Chinese law, the common scenarios where the assets of a third party may be enforced or the third party may be added as a judgment debtor include the following. • Unpaid capital contributions – shareholders who default on their subscribed capital contributions, or withdraw contributions, may be added to the enforcement proceeding and held liable within the amount of the deficiency (even if they have since transferred their shares). • Illegal deregistration – if a company is deregistered without liquidation, its shareholders, directors or controlling shareholders may be held jointly liable for its outstanding debts. • Post-dissolution asset distribution – if a dissolved company’s assets were distributed to sharehold - ers who failed to satisfy outstanding debts, such shareholders may be liable within the amount received. • Companies with sole shareholders – if a sole share - holder cannot demonstrate that corporate assets are independent of personal assets, courts may pierce the corporate veil and hold the shareholder directly liable. • Partnerships – general partners are jointly and sev - erally liable for partnership debts. Limited partners may also be held liable within the scope of unpaid capital contributions. 2.3 Costs and Time Taken to Enforce Domestic Judgments Enforcement Fees The applicant is not required to prepay execution fees when applying for compulsory enforcement in Main - land China. Such fees shall be borne by the judgment debtor and deducted from the recovered assets. Enforcement Timeline The statutory enforcement period is nominally six months for enforcement case filing; however, the
actual duration may vary significantly on a case-by- case basis. This depends primarily on: • the number of executable asset leads; • complexity of asset disposal; • workload and proactivity of the enforcement judge; and • whether relevant enforcement procedures are triggered (eg, enforcement objections, reconsid - erations, actions against enforcement objections, enforcement settlement, or enforcement resump - tion). 2.4 Post-Judgment Procedures for Determining Defendants’ Assets Methods for Courts to Investigate a Defendant’s Assets in Enforcement Proceedings Court-ordered asset disclosure The court issues an Asset Disclosure Order, requir - ing the debtor to truthfully disclose its current assets (eg, deposits, real estate, vehicles, equity, claims) and property transfers within one year prior to receiving the enforcement notice. Refusal to comply or false reporting by the debtor may result in fines, detention or criminal liability. Court-initiated inquiries The court can efficiently query nationwide information on the debtor’s asset through the System, including but not limited to bank deposits, real estate proper - ties, motor vehicles, insurance, securities holdings, financial investment products, vessels and digital pay - ment balances (eg, Alipay/WeChat Pay balances). On-site investigation The enforcement judge may conduct field surveys and searches at the debtor’s domicile or any loca - tions where property might be located. In addition, the enforcement judge may collect asset clues from relevant units (eg, municipal commission of housing, traffic management bureaus, market regula - tion administrations, housing fund management cen - tres, social security bureaus, employers) or individu - als.
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