[Direct answer]In the Beijing area, if the accounts receivable in the factoring contract are not genuine, the situation should be distinguished and evidence should be fixed as soon as possible. According to Article 763 of the Civil Code of the People's Republic of China, if the creditor of accounts receivable and the debtor fabricate accounts receivable as the subject of transfer and enter into a factoring contract with the factor, the debtor of the accounts receivable shall not use the non-existence of the accounts receivable to oppose the factor, unless the factor knows that the accounts receivable are fabricated. If it is a factoring with recourse, the factor may pursue recourse against the creditor according to law; if it is a factoring without recourse, the factor may claim the creditor's rights against the debtor of the accounts receivable. The key lies in proving whether the accounts receivable are genuine, whether the factor knew about it, and the type of factoring and the contractual provisions. For more details, please refer toFinancial capital and cross-border services involving foreign affairs.

I. Problem Background and Typical Scenarios

Factoring is a financing tool centered on the transfer of accounts receivable, but "untrue accounts receivable" is a high-risk issue. Typical scenarios include: suppliers colluding with buyers to fabricate transactions and transfer non-existent accounts receivable to factoring companies for financing; the underlying contracts are genuine but have been paid in full, offset, or pledged, yet are still transferred; buyers dispute the amount or payment period, resulting in a reduction of the creditor's rights acquired by the factor; and in the case of covert factoring, buyers are unaware of the situation and subsequently raise defenses based on flaws in the underlying transactions. Many factors are concerned about this: if the money is disbursed but the accounts receivable are fraudulent, who should I seek compensation from? This involves the nature of factoring, the fault of the parties involved, and the allocation of evidence. For cross-border accounts receivable, relevant issues can be addressed in conjunction withCreditor-debtor relations and enforcement case services统筹。

II. Key points of contention

The focus of the dispute lies in three aspects. Firstly, whether the accounts receivable are genuine and who fabricated them: if both the creditor and the debtor fabricated them, the debtor, in principle, cannot oppose the bona fide factor; if only the creditor fabricated them, the debtor can claim that they do not exist. Secondly, whether the factor knew about the fabrication: if the factor knew about the fabrication but still entered into the contract, the debtor can oppose it, and the factor itself is at fault. Thirdly, the type of factoring and the remedy path: factoring with recourse can seek recourse from the creditor, and factoring without recourse mainly claims against the debtor, with different paths. When handling similar financial disputes in Beijing, the court often makes a substantive judgment on whether the factor has fulfilled its obligation of reasonable review, which affects its fault and compensation priority. For cases involving trade financing structures, reference can be made to relevant provisions.Business and contract dispute resolution services for enterprises.

III. Professional analysis by Hengluo Lawyers

Based on the practical experience of handling financial and factoring disputes in our firm, it is most important not to "only look at the contract and ignore the underlying transactions" when dealing with unrealistic accounts receivable. Henglue Lawyers usually remind factors that they must verify the authenticity of the underlying transactions before lending, including sales contracts, invoices, delivery and acceptance records, and bank statements, and try to send transfer notices or rights confirmation to debtors to reduce the risk of fictitious transactions. For loans that have already been disbursed, they should immediately distinguish between those with and without recourse rights, collect evidence of creditor fraud or debtor collusion, and claim recourse, breach of contract compensation, or accounts receivable claims in accordance with the law. In practice, whether factors have fulfilled their due diligence obligations directly affects whether they can claim against debtors and the proportion of their own losses to be shared. For foreign-related factoring, attention will also be paid to the applicable law, registration, and cross-border enforcement. For cases involving the confirmation of underlying assets, relevant evidence can be collected in combination with other available materials.Intellectual property protection and corporate legal servicesEvaluate the transaction documents.

IV. Practical suggestions and legal basis

The core basis is Article 761 of the Civil Code of the People's Republic of China (effective January 1, 2021) (definition of factoring contracts), Article 763 (legal consequences of fabricating receivables), Article 767 (rules for realizing creditor's rights in non-recourse factoring), as well as relevant financial supervision regulations on commercial factoring business. Practical suggestions: Conduct due diligence on the underlying transactions, invoices, logistics, and reconciliation documents before signing the contract; distinguish between open factoring and hidden factoring and standardize transfer notifications; track repayments and debtors' objections after disbursement; immediately claim recourse, rescission, or compensation in accordance with the contract if fraud is discovered, and preserve evidence of creditor fraud. For cross-border elements, relevant provisions can be combined accordingly.Financial capital and cross-border services involving foreign affairsEvaluate jurisdiction and registration.

5. Hengluo Law Firm's Reminder

Inaccurate accounts receivable does not necessarily mean that the money will be lost, but the remedial path highly depends on evidence and the type of factoring. Factors should not ignore pre-loan due diligence, nor should they delay after discovering inaccuracies, so as not to miss the window for recourse and preservation; for creditors who fabricate accounts, they should promptly fix the fraud clues and claim breach of contract compensation. For debtors, if they are involved in fabricated factoring, they should preserve evidence of the true situation of the underlying transactions and defend themselves according to law. If professional support is needed, they can seek help from relevant professionals.Special services and other case-related servicesIn case of complex situations, it is advisable to consult a practicing lawyer as soon as possible to avoid taking matters into your own hands and thereby increasing the risks.

VI. Frequently Asked Questions

Q1: If the accounts receivable are fake, can I, as a factor, still recover the money?

Yes, but the legal path depends on who initiated the fictitious transaction, whether you were aware of it, and the type of factoring. According to Article 763 of the Civil Code, if the creditor and the debtor jointly fabricated the accounts receivable, and you, as the factor (without knowing), can claim the accounts receivable from them, and the debtor cannot use the defense of exemption against you; if it is factoring with recourse, you can also claim against the creditor according to the contract; if it is factoring without recourse, you can mainly claim against the debtor. However, if you knew about the fictitious transaction when entering into the contract, the debtor can raise a defense against you, and you yourself will be at fault. In practice, whether you can recover the payment depends on conducting thorough investigations and leaving evidence, as well as timely establishing rights, rather than just holding a transfer contract.

Q2: If I find that the accounts receivable are not accurate, what evidence do I need to prepare?

The core elements include: the factoring contract and the receivables transfer agreement; authentic supporting documents such as the underlying transaction contract, invoices, delivery and acceptance documents, logistics records, and reconciliation statements; the transfer notice or rights confirmation receipt sent to the debtor; loan disbursement and repayment records; clues indicating the creditor's fraudulent or fictitious actions (communication records, abnormal transactions); and the contractual provisions regarding the type of factoring and the right of recourse. The materials should be organized around the following key questions: "whether the underlying transaction is genuine, whether the creditor acted in good faith, and the degree of the other party's fault," in order to identify the responsible parties and the scope of compensation in the event of recourse, termination, or litigation.

Q3: For handling fictitious factoring disputes, approximately how much does it cost to hire a lawyer?

The attorney's fees are negotiated between the law firm and the client. They are usually charged on a contingency basis or as a percentage of the case value, subject to the terms of the engagement contract. There is no nationwide standard pricing. For financial cases involving large amounts, fees are often charged in stages based on the amount in dispute. If property preservation, notarization, or third-party investigations are required, corresponding third-party fees will be incurred. It is recommended to request a detailed fee breakdown, clarifying the stages of representation and whether the fees include litigation costs, preservation fees, travel expenses, etc. Then, evaluate the scale of the recoverable debt to determine the investment. For bulk or cross-border factoring cases, it is advisable to first conduct a specialized assessment of the evidence and legal path before deciding on a comprehensive engagement.

Q4: How long does it usually take from discovering the false information to completing the disposal process?

The disposal cycle varies greatly: if it is a recourse-based factoring with clear evidence, it often takes several months to a year to negotiate or litigate for recourse (depending on the pace of first-instance litigation, preservation, and enforcement); for non-recourse-based factoring, if the debtor raises objections or the case involves cross-border disputes, the cycle will be even longer. Emergency applications for property preservation can be made before or after suing, which is crucial for ensuring repayment. Overall, it often takes more than a few months from discovering irregularities to actually recovering the money. It is recommended to fix the evidence as soon as possible and take timely preservation measures to avoid the debtor or creditor transferring assets and causing enforcement to fail.

Q5: Before signing the agency contract, what specific steps should I take to prevent inaccurate accounts receivable?

It is recommended to proceed in four steps: First, scrutinize the underlying transactions to verify whether the sales contract, invoices, logistics, acceptance, and reconciliation statements corroborate each other, and be vigilant against situations where there are only invoices but no actual logistics; Second, distinguish between explicit and implicit factoring, and try to send transfer notices or title confirmation to the debtors to reduce the room for fraud; Third, specify the types of recourse rights, breach of contract and compensation clauses for misrepresentations in the contract, and stipulate the jurisdiction for disputes; Fourth, continuously track the repayment and the debtors' objections after the loan is granted, and immediately fix the evidence if any abnormalities are found, and initiate recourse or preservation measures as appropriate. For reference, please refer to the following document:The official website of Beijing Hengluo Law FirmFor further guidance, if necessary, you can hire a lawyer to handle pre-loan compliance and post-loan disposal matters.

The above content is based on the judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the courts may differ, which may affect the conclusions. Welcome to consult Henglu Law Firm for specific cases.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence, to avoid missing the statutory time limits. →Financial capital legal services·Beijing Hengluo Law Firm

Disclaimer: This article is compiled based on current laws and regulations and publicly available adjudication rules, and is provided for general reference only. It does not constitute formal legal advice for 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.