[Direct answer]In the Beijing area, the collection of corporate creditor's rights can adopt risk-based agency, but it is feasible only if three conditions are met: the creditor's rights documents are clear and traceable, such as contracts, invoices, delivery notes, and reconciliation statements; the debtor's repayment ability can be assessed, and there are identifiable property clues; and the ratio of the creditor's amount to the expected cost is reasonable. Otherwise, even if the full amount is recovered, it will be difficult to cover the investment. The fee characteristics of risk-based agency are usually that a low fixed fee is charged or no fee is charged in the early stage, and a certain percentage of the actual recovered amount is charged. It should be noted that the "Measures for the Administration of Lawyers' Service Fees" (issued by the National Development and Reform Commission and the Ministry of Justice on April 2, 2004) has clear restrictions on the scope of application of risk-based agency. In practice, the calculation basis, proportion, distribution order of the recovered funds, and the method of fee settlement upon termination of the contract should be agreed in writing. Specifically, the current effective laws and regulations and judicial judgments shall prevail. For reference, please refer to the following content:Creditor's rights and debts, and enforcementThe service description in the column.

1. Problem background and typical scenarios

Many of those who consult this issue are enterprise executives or financial managers who are faced with piling up accounts receivable and difficulties in collecting payments. There are three common scenarios: first, the cooperating party has long been in arrears with large amounts of unpaid debts; second, multiple customers' debts are scattered, and it's too costly to collect them one by one; third, the other party's operating conditions have clearly deteriorated, and they are worried that there will be no assets to enforce after winning the lawsuit. In practice, the biggest dilemma for enterprises in collecting debts is the uncertainty of costs and recovery: the fixed lawyer's fees are relatively certain, but the recovery result depends on the debtor's repayment ability and willingness to cooperate. Contingency fee arrangements are specifically designed to address this contradiction, but the applicable conditions are quite strict, and not all creditor's claims are suitable for it. Therefore, a thorough investigation needs to be completed before initiating the process.

II. Key points of contention

The first focus is whether the creditor's evidence is complete and can prove the establishment of the creditor's rights. The second focus is the availability of clues to the debtor's assets and the assessment of their solvency. The third focus is the scope of application of risk-based legal fees and the requirements for fee caps. The fourth focus is how to define the calculation basis of the recovered funds, whether it includes the principal, interest, or the penalty for breach of contract. The fifth focus is the distribution order when multiple parties jointly repay the debt. The sixth focus is the settlement of fees when the entrustment contract is terminated midway. The seventh focus is the connection between the statute of limitations and the due date of the creditor's rights. The eighth focus is whether there is a risk of debtor's liability being confused with that of employees or shareholders. The organization of evidence can be referred to for reference.Special services and other casesThe instructions in the column.

III. Professional analysis by Henglue Lawyers

Take a mediation case handled by Attorney Tian Jia Yan of our firm as an example: The lender and the borrower were originally friends. Since 2022, the borrower has borrowed money multiple times on the pretext of opening a pet store, and the lender has lent money to the borrower through bank transfers and mobile payments, with a total amount being quite large. On November 3, 2024, the two parties signed a written agreement, stipulating that the borrower should repay the entire principal by January 1, 2025, and voluntarily bear the losses such as litigation fees, attorney's fees, transportation fees, and preservation guarantee fees in the event of default. After the due date, the borrower explicitly stated that he was unable to repay the loan. After assessing the case, the attorney chose to prioritize mediation to achieve quick repayment and set strict default clauses in the mediation agreement: repay part of the loan in two installments, and if there is a default in either installment, the borrower shall pay the full amount and fees according to the original agreement. The court issued a civil mediation agreement to confirm this. This case highlights the core trade-off in debt collection practice: contingency fees are not the only option. When the creditor has complete proof of debt and the debtor is willing to repay but faces short-term funding difficulties, setting binding default clauses through mediation is often more controllable than direct litigation. The design of contract clauses can also be referenced in this regard.Business and contract disputes in enterprisesColumn.

IV. Practical suggestions and legal basis

Action suggestions: 1. First, conduct a credit analysis to confirm the integrity of contracts, invoices, delivery receipts, reconciliation statements, and payment records. 2. Evaluate the debtor's property clues and repayment capacity, including litigation status, enforcement records, and operating conditions. 3. Clearly select collection methods and compare the advantages and disadvantages of fixed fees, phased fees, and contingency fees. 4. Require a written contract when entrusting collection, specifying the service phases, fee calculation methods, and distribution order of recovered funds. 5. Agree on the handling of fees in the event of contract termination or when the debtor has no assets. 6. Simultaneously manage statute of limitations and prepare for asset preservation. 7. Consider bundling multiple creditor claims to reduce unit costs. Legal basis: - The "Measures for the Administration of Lawyer's Service Fees" (issued by the National Development and Reform Commission and the Ministry of Justice on April 2, 2004) regarding fee methods and contingency fees. - Articles 188 and 195 of the "Civil Code of the People's Republic of China" on the statute of limitations. - Specific provisions shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Reminder

First, the premise of risk-based attorney fees is the possibility of recovery. If the debtor truly has no assets, it will be difficult for lawyers to obtain corresponding returns on their investments. Second, the contract must specify the calculation basis for the recovered funds, including whether or not to include interest and penalties, which directly affect the final distribution. Third, the statute of limitations management cannot be relaxed due to the use of risk-based attorney fees. Fourth, before entrusting a lawyer, it is necessary to understand the debtor's litigation and enforcement status, which often determines the actual recovery rate. Fifth, the distribution order for multiple joint repayments should be agreed upon in advance to avoid disputes arising afterward. Sixth, the settlement method for terminating the entrustment midway should be specified in advance. Seventh, the combination of fixed fees and risk-based attorney fees is also common in practice, which can reduce the financial pressure on both parties.

VI. Frequently Asked Questions

Q1: Can enterprises collect debts through risk-based representation agreements?

It's possible, but certain conditions must be met: the creditor's evidence must be clear and complete, the debtor's repayment ability must be verifiable, and the ratio of the creditor's amount to the investment cost must be reasonable. The fee structure for risk-based litigation usually involves low or no upfront fixed fees, with payments made as a percentage of the actual amount recovered. If the property is not ultimately recovered, it can be difficult for lawyers to obtain a commensurate return on their efforts, so this approach should not be used when there are doubts about the creditor's claim itself. For more information on related services, please refer to the following link:Creditor's rights and debts, and enforcementColumn.

Q2: How is the fee for risk-based legal representation typically charged?

A common practice is to charge a lower fixed fee or no fixed fee in the early stage, and then charge a fee based on a certain percentage of the actual recovery amount after the recovery. The contract should specify the calculation basis of the recovery amount, whether it only includes the principal or also includes interest and penalties. This provision directly affects the final fee amount. In addition, it should also stipulate the distribution order when multiple people jointly repay the debt, and the settlement method when the contract is terminated early.

Q3: What type of creditor claims are most suitable for risk-based legal representation?

Suitable creditor's rights usually have three characteristics: first, the supporting documents are complete, and the contract, invoice, delivery note, and reconciliation statement can corroborate each other; second, the debtor is still in operation or has verifiable assets, and there is a possibility of actual recovery; third, the amount of the creditor's rights is large, and the cost of recovery is relatively controllable. Unsuitable situations include incomplete supporting documents, debtors who have been deregistered or lost contact, or those who are clearly insolvent. In such cases, it is difficult to recover the investment in risk representation, so it is necessary to conduct due diligence first before deciding on the entrustment method.

Q4: Can the risk agency be terminated at any time during the contract period?

It depends on the contractual provisions. In practice, it is reasonable to specify the conditions for termination, the method of settling fees, and the handling of completed work in the contract to avoid disputes arising upon termination. If using a contingency fee arrangement, it is recommended to stipulate how the agency relationship will end and how to handle the work already invested if the debtor truly has no enforceable assets, while retaining the option to terminate the contract at any time and settle fees based on the amount of work completed. Before signing the contract, these clauses should be checked item by item.

Q5: If the creditor has no money left, can they still pursue the debtor for repayment?

It is still necessary to verify. Even if the debtor appears to have no assets, there may still be clues such as accounts receivable, equity, intellectual property, unpaid due claims, or assets held on behalf of others. It is recommended to apply to the court to investigate the debtor's assets and business operations, and to consider asset preservation simultaneously during the litigation. If there are indeed no assets, the creditor can still retain the right to claim and apply for resuming enforcement when the debtor's repayment capacity is restored. Collection work should focus on the long term and avoid giving up just because there are temporarily no assets.

The above answer is based on the judicial practice in Beijing. The judicial interpretation in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, to avoid missing the statutory time limit. →\nLegal services for creditor-debtor disputes·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.