[Direct answer]Yes. Before suing or during litigation, enterprises can apply for property preservation to recover debts: if the situation is urgent and failure to immediately preserve the property will cause irreparable damage, they can apply for pre-litigation preservation in accordance with Article 104 of the Civil Procedure Law of the People's Republic of China before suing or arbitrating. The court shall make a ruling within 48 hours. The applicant shall provide a guarantee, and the preservation shall be lifted if no lawsuit is filed within 30 days after the preservation; if the case has entered litigation, they can apply for litigation preservation in accordance with Article 103. The preservation shall be limited to the amount of the claim and shall include sealing or freezing the other party's accounts, real estate, equity and other property. This is an effective means to prevent the transfer of assets and promote quick repayment. Beijing Henglu Law Firm\nCreditor-debtor enforcement teamWe can assist in designing security solutions. For more details, please refer to the following link:Beijing Henglu Law Firm.

I. Legal basis and interpretation of provisions

1. Article 103 of the Civil Procedure Law of the People's Republic of China (amended in 2023 and implemented on January 1, 2024)

The court, upon the application of the other party, may order the preservation of the other party's property, require the other party to take certain actions, or prohibit the other party from taking certain actions in cases where the judgment may be difficult to enforce or cause other damages to the parties due to the actions of one party or other reasons; in urgent cases, the court must make a ruling within 48 hours. This article is the basic basis for litigation preservation, and the prerequisite for its application are the existence of a real risk of "difficulty in enforcing the judgment", such as the other party transferring deposits, selling property at a low price, or liquidating the company. When applying for preservation, the applicant shall submit a preservation application, clear property clues, and guarantees. If the court rules to take preservation measures, the enforcement will be initiated immediately, and the respondent will often return to the negotiation table as a result.

2. Article 104 of the Civil Procedure Law of the People's Republic of China (amended in 2023, effective from January 1, 2024)

When an interested party, due to an emergency situation, fails to apply for preservation of property immediately, which will cause irreparable damage to their legitimate rights and interests, they may apply to the court for property preservation before initiating litigation or applying for arbitration; the applicant shall provide a guarantee, and the court shall make a ruling within 48 hours. If the court decides to adopt preservation measures, it shall immediately begin to implement them. If the applicant fails to initiate litigation or apply for arbitration within 30 days after the court adopts preservation measures, the court shall lift the preservation order. The "threshold" for pre-litigation preservation is higher than that for litigation preservation: the three conditions of urgency, guarantee implementation, and a 30-day litigation deadline are indispensable. Enterprises should prepare litigation materials simultaneously to avoid the failure of preservation measures.

3. Practical adjudication guidelines (guarantees, fees, and preservation errors)

In practice, the most common guarantee method is the litigation preservation liability insurance guarantee issued by insurance companies, with premiums ranging from one-thousandth to three-thousandths of the preserved amount, which is cost-effective and quick to issue; cash or real estate guarantees are rarely used. The preservation fees are calculated in accordance with the "Method for Payment of Litigation Costs" and are cumulative based on the amount of the preserved property, with a maximum of no more than 5,000 yuan. There are two high-frequency disputes: first, compensation for preservation errors - if the application is erroneous, the applicant shall compensate the preserved person for the losses suffered due to the preservation, so the property clues and the amount of the request should have a basic basis to avoid abusive preservation; second, first seizure and waiting-list seizure - if the same property has been seized in another case, a waiting-list seizure can be carried out, and the subsequent claimants will be compensated in order. Those who act first usually take the initiative.

II. Henglue Law Firm's Real Cases (Detailed Review)

Review of the case:At the end of 2016, through an introduction, Ms. Chen provided wooden door installation services (including labor and materials) for a project of a construction engineering company. In early 2017, after the installation was completed, the company has been delaying the payment of 870,000 yuan for the materials. After negotiation, on May 3, 2019, the company issued a promissory note stating that it owed Ms. Chen 520,000 yuan for the materials and stamped it with the company's official seal. On January 18, 2021, the company's former legal representative transferred 100,000 yuan to repay the debt. Since then, Ms. Chen has repeatedly demanded repayment but received no response. After failing to recover the debt, Ms. Chen entrusted Beijing Henglu Law Firm to handle the case for her.Tian JiayanThe lawyer protects the client's rights and interests.

The focus of the controversy:First, how to determine the contractual relationship and the amount of the debt, and the legal effect of the promissory note stamped with the company's official seal; Second, whether pre-litigation property preservation can put rapid pressure on the debtor; Third, who should bear the preservation guarantee fee incurred in protecting one's rights.

Our position and that of the other party are as follows:Ms. Chen requests the court to order the other party to pay the overdue payments, the preservation guarantee fees and other expenses incurred in protecting her rights, and to bear the litigation costs; the defendant, having been legally summoned, failed to send representatives to court and did not file a defense.

Attorney's Strategy and Legal Opinions:Attorney Tian Jiaoyan analyzed that the defendant defaulted on the payment and issued a promissory note stamped with the company's official seal, indicating the existence of a factual sales contract between the two parties. The defendant should fulfill its obligations in a timely and comprehensive manner according to the promissory note. To recover the debt to the greatest extent, the attorney applied for pre-litigation property preservation, seizing, impounding, and freezing the defendant's 770,000 yuan bank deposits or equivalent assets to directly lock down its payment capacity. At the same time, the attorney assisted in organizing evidence such as the promissory note, bank transfer records, collection letters and mailing information, screenshots of text messages, phone recordings, invoices for preservation guarantees, and enterprise credit reports, forming a complete chain of evidence. The attorney also argued that the preservation guarantee fees constitute reasonable expenses for protecting rights and should be borne by the debtor.

The court's reasoning and the outcome of the case:The court supported the lawyer's opinions and demands, and in accordance with Articles 509 and 579 of the Civil Code of the People's Republic of China and Article 147 of the Civil Procedure Law of the People's Republic of China, ruled that the defendant shall pay the plaintiff 770,000 yuan in damages and 700 yuan in preservation guarantee fees within 15 days after the judgment takes effect; the case acceptance fee shall be reduced by half to 4,175 yuan, and the preservation fee shall be 4,370 yuan, all of which shall be borne by the defendant. This lawsuit prompted the other party to make quick repayments, and the leverage effect of pre-litigation preservation on the pace of repayment has been fully verified.

This case is handled by Beijing Henglu Law Firm.Tian JiayanThe attorney (practice license number: 11101202111381309, subject to the document issued by the judicial administrative organ) acts as the agent.

III. Frequently Asked Questions

Q1: How much does it cost to apply for property preservation?

There are mainly three fees: the preservation fee is calculated according to the amount of the preserved property in stages, with a maximum of no more than 5,000 yuan; if the guarantee fee is covered by the insurance company's litigation preservation liability insurance guarantee, the premium will be about one-hundredth to one-third of the preserved amount; the preservation and guarantee fees in the litigation stage can be claimed by the other party if the plaintiff wins the case. In this case, the preservation guarantee fee of 700 yuan was ruled to be borne by the debtor. Overall, compared with the risk of having the transferred property and not being able to get the money after winning the lawsuit, the preservation cost is controllable and worth investing in priority.

Q2: What are the conditions that must be met for pre-litigation property preservation?

The following four conditions must be met simultaneously: First, the situation must be urgent, such as the other party transferring assets or unusual movements in account funds, which will cause irreparable damage if not preserved immediately; Second, there must be clear clues to the assets to be preserved, such as bank accounts, real estate, vehicles, and equity; Third, a guarantee must be provided, which is often a letter of guarantee from an insurance company in practice; Fourth, a lawsuit or arbitration application must be filed within 30 days after the court takes preservation measures, otherwise the preservation will be lifted. The 48-hour ruling mechanism for pre-litigation preservation is quick, but the urgency argument must be solid. It is recommended that lawyers prepare the application materials and evidence.

Q3: If I don't know what assets the other party owns, can I still apply for a preservation order?

You can first conduct a property investigation and then file an application. Common approaches include: equity and foreign investment information in the Enterprise Credit Information Disclosure System; lawyer's investigations of real estate registration and vehicle registration (some courts can inquire on their own authority); the receiving accounts in the transaction between the two parties; and applying to the court to inquire through the online investigation and control system in litigation. The practical advice is to "seize what is known first and then investigate what is unknown": first secure the known accounts and properties, and the court will supplement the investigation and control of other clues in the enforcement stage. The more specific the clues are, the faster the preservation ruling will be implemented.

Q4: If the security company makes a mistake, will they compensate the other party?

Yes. According to the Civil Procedure Law, if there are errors in the application, the applicant shall compensate the party subject to preservation for the losses suffered due to the preservation. Typical cases include preservation exceeding the requested amount, preservation of the property of a third party, losing the case and the preservation being obviously unfounded. Therefore, before applying for preservation, the applicant should evaluate the basis for winning the case and the ownership of the property. The amount of preservation shall be limited to the creditor's claim to avoid "excessive preservation". If an insurance company's guarantee letter is used, the liability for compensation arising from preservation errors is usually paid by the insurance company within the scope of the guarantee first, and then recovered from the applicant according to the agreement. This is also one of the reasons why the guarantee letter model is widely used.

Q5: What should I do if the other party still refuses to repay the money after I've taken legal action?

Security preservation is just a freezing measure. To recover the money, it still needs to go through litigation and enforcement. If the other party fails to perform after the judgment takes effect, apply for enforcement in time and apply for the disposition of the preserved property. After auction, sale or deduction, the creditor shall be given priority in compensation. If there is a surplus after the disposition of the first-seized property, it shall be distributed in accordance with the order. To facilitate the lifting of the freeze, the other party will often take the initiative to reach a settlement. At this time, the creditor can require the other party to make a payment first or provide alternative guarantees before lifting the freeze, and the settlement agreement shall be written into the court's transcript or mediation document and given enforceable force. If the creditor finds that the other party still has signs of transferring assets, he/she may apply for additional security preservation of other assets.

IV. Suggestions for Protecting Your Rights

  • If you discover signs of the other party transferring property or engaging in abnormal business operations, you should immediately evaluate the possibility of pre-litigation preservation and freeze the assets before they are transferred.
  • For daily transactions, it is necessary to keep contracts, account statements, IOUs, collection letters, and mailing receipts, so as to quickly piece together evidence during litigation and preserve legal rights.
  • The amount of the preservation order is limited to the creditor's claim. The applicant shall apply for it after the property clues are verified to avoid the risk of reverse compensation caused by the preservation error.
  • Replace the cash guarantee with an insurance company's guarantee to reduce the capital occupancy; it is necessary to file a lawsuit within 30 days after the preservation to prevent the automatic termination of the guarantee.
  • When the other party applied for unblocking negotiations, they insisted on the basic order of "paying first or providing alternative guarantees, then lifting the preservation measure".

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.Legal services for creditor-debtor disputes·Attorney Tian Jiayan·Beijing Henglue Law Firm