[Direct answer]When a company's accounts receivable are overdue, the legal process follows this sequence: send a letter to collect the debt and interrupt the statute of limitations → confirm the debt through account reconciliation → apply for a payment order → initiate litigation or arbitration and simultaneously apply for property preservation → apply for enforcement. The core basis is the liability for breach of contract in Article 577 of the Civil Code and the three-year statute of limitations in Article 188; the other party's signing of the account reconciliation form and commitment to repayment can both interrupt the statute of limitations and restart the calculation. The company should immediately sort out the contracts, invoices, account reconciliation forms, delivery receipts, and collection records, first assess the other party's repayment ability, and then choose to collect the debt or initiate litigation to prevent the statute of limitations from expiring and the assets from being transferred. For more details, please refer to the following link:Legal services for cases involving the enforcement of creditor's rights and debt repaymentAndBeijing Henglue Law Firm.

I. Legal basis and interpretation of provisions

1. Article 577 of the Civil Code of the People's Republic of China (effective from January 1, 2021)

If a party fails to perform its contractual obligations or performs them in a manner inconsistent with the agreement, it shall bear such breach of contract liabilities as continuing performance, taking remedial measures, or compensating for losses. This is the basis for enterprises to recover accounts receivable such as payments for goods, project fees, and service charges: if the enterprise has delivered the goods or provided the services but the other party has failed to make payments, the enterprise has the right to request the other party to continue to fulfill its payment obligations and claim damages for late payments. The key points of evidence lie in proving that the enterprise has performed its obligations in accordance with the agreement. Delivery receipts, acceptance records, invoice receipts, and account reconciliation confirmations mutually corroborate each other, forming the main line of evidence for establishing the creditor's rights.

2. Article 188 of the Civil Code of the People's Republic of China (effective January 1, 2021)

The statute of limitations for bringing a lawsuit to the people's court to protect civil rights is three years, calculated from the date when the right holder knows or should have known that the rights have been infringed and the date when the obligee becomes aware of it. Generally, the statute of limitations for accounts receivable starts from the expiration of the agreed payment date. During this period, if there are written reminders, account reconciliations, or the other party's commitment to repayment, the statute of limitations can be interrupted and restarted. Although a lawsuit can still be filed after the statute of limitations has expired, if the other party raises the statute of limitations defense, the creditor will lose the right to protection of winning the lawsuit. Enterprises must take action within the statute of limitations and keep records of each reminder as evidence.

3. Practical judicial interpretation (what to review in debt cases)

The court reviews cases of arrears by focusing on three sets of evidence: the mutual corroboration of contracts and performance certificates, the confirmation of the amount of arrears through reconciliation or settlement, and the continuous and complete collection records. In practice, "only invoices without receipt slips" and "reconciliation statements signed only by sales staff" often become points of dispute. The standard practice is to have the other party stamp and confirm them. The payment order procedure is less costly, but the other party's written objections will be invalidated immediately, making it suitable for scenarios where the relationship between the parties is still good and the creditor's rights are clear. In litigation, applying for property preservation simultaneously, freezing the account first and then negotiating, can significantly increase the recovery rate. For disputes over arrears arising from contractual relationships, it is also possible to combine other legal means with it.Legal services for disputes over commercial contracts in enterprisesConduct a comprehensive assessment of the basic contract risks.

II. Practical experience of Henglue Law Firm

Based on Henglue's practical observations in handling accounts receivable and enforcement cases, enterprises are most likely to lose points in three stages when recovering debts. Firstly, insufficient transaction documentation: missing documents in contract signing, order placement, delivery, acceptance, and reconciliation may lead to estimating the amount of debt during court hearings. It is recommended that enterprises establish a process of "reconciliation first, invoicing second, and payment third" to formalize loose transactions into signed creditor's rights certificates. Secondly, debtors' frequent defenses: quality objections, statute of limitations expiration, and entity confusion (receiving goods and conducting transactions under the name of affiliated companies) are the three most common defenses. Specifying the receiving and settlement entities, agreeing on the delivery address, and setting a quality objection period during contract signing can preemptively counter most defenses. Thirdly, winning the judgment is just the first step: debtors often transfer assets during the enforcement stage or go missing after debt repayment programs. It is necessary to continuously investigate asset clues and, if necessary, add unpaid shareholders or initiate actions of rescission and subrogation. Proactively managing accounts receivable saves much more money than litigation after the fact; once overdue, the earlier legal procedures are initiated, the higher the probability of recovering the payment. Daily risk control can refer to the following measures:Corporate legal servicesFor difficult execution issues or deadlocks, you can seek adviceSpecialised services - Legal services.

III. Frequently Asked Questions

Q1: Can I still sue for the overdue accounts receivable after three years?

You can sue, but there is a statute of limitations risk. The statute of limitations is three years. If the other party raises a statute of limitations defense after the time limit has passed, the court will no longer protect you. However, the statute of limitations can be interrupted and restarted due to collection efforts, account reconciliation, or the other party's promise to repay. Enterprises should organize previous collection letters, WeChat records, and account reconciliation notes to prove the interruption of the statute of limitations. If the other party has signed and confirmed the debt or promised to repay, the statute of limitations will restart from the date of confirmation, and there is still a good chance of winning the case. Before suing, it is advisable to have a lawyer assess the status of the statute of limitations first.

Q2: Can we recover the payment if we haven't signed a written contract?

Yes. The contract is not limited to written form. Quotations, orders, WeChat communications, delivery receipts, invoices, and reconciliation statements together constitute evidence of the actual contractual relationship. The court reviews the case based on the principle of "who claims, who provides evidence", with the key point being to prove that there was a transaction agreement between the two parties and that the plaintiff has fulfilled its obligations. It is recommended to promptly guide the other party to issue a reconciliation confirmation or a repayment commitment, consolidate the fragmented evidence into clear creditor's rights documents, and then decide whether to send a collection letter or file a lawsuit directly. The success rate of such cases with sufficient evidence is quite high.

Q3: How much does it cost and how long does it take to recover the arrears?

The acceptance fee for property cases is calculated cumulatively according to the amount of the subject matter. For example, for a subject matter of 100,000 yuan, the fee is approximately 2,300 yuan. If the case is handled through a simplified procedure, the fee will be reduced by half. After a victory in the lawsuit, the litigation costs are usually borne by the losing party. For debt cases with clear facts, it generally takes three to six months from the filing of the case to the first-instance judgment, and the outcome can be seen within a year after enforcement. If the debtor has assets and takes timely preservation measures, the funds can often be recovered during the mediation or fast-track trial stage of the lawsuit. In comparison, the losses from long-term unpaid debts and the cost of capital occupation are higher, so it's more cost-effective to take timely action.

Q4: How to prevent the other party from transferring assets during the litigation process?

The most effective measure is property preservation. In urgent cases, a pre-litigation preservation order can be applied for before initiating a lawsuit, and the court will make a ruling within 48 hours; preservation orders can also be applied for during the litigation process to seize the other party's bank accounts, real estate, vehicles, or freeze their receivable claims. Enterprises should provide the court with the account information and property clues obtained during the transaction and provide guarantees as required. After the preservation order is issued, the other party will generally be unable to dispose of their property during the litigation process, which is also a powerful bargaining chip for prompt settlement. However, if the preservation order is erroneous, the applicant will need to compensate for the losses, so the amount and clues involved must be carefully verified.

Q5: What should I do if the other party still refuses to pay after the judgment?

You can apply for enforcement within two years after the expiration of the performance period specified in the judgment. The court will search and monitor the debtor's bank deposits, real estate, vehicles, and equity through online channels. If there are no assets available for enforcement, the case will be "terminated as a final judgment", but if any clues to the debtor's assets are found, you can apply for resuming enforcement at any time. You can also, depending on the circumstances, add unpaid shareholders to the case, initiate lawsuits to revoke low-price transfers, and apply for restrictions on high-consumption and inclusion in the list of dishonest people to exert pressure. Enforcement is a long-term battle. When necessary, you can entrust a lawyer to continuously follow up on the investigation, and the recovery rate of the debt will be significantly higher than just waiting for the court to search and monitor the debtor's assets.

IV. Suggestions for Protecting Rights

  • If the overdue period exceeds thirty days, formal collection procedures will be initiated: both the reconciliation letter and the lawyer's letter require written delivery and retention of the receipt. This not only puts pressure on the debtor but also interrupts the three-year statute of limitations.
  • Every quarter, we should clear the aging of accounts receivable and manage them by grade. For overdue customers approaching the three-year statute of limitations, we should give priority to reconciling accounts, confirming payments, or initiating lawsuits against them.
  • Before filing a lawsuit, first check the other party's litigation history, creditworthiness, and business status, and assess their repayment ability and enforcement prospects to avoid winning the case but not being able to collect the money.
  • When suing for large-amount debts, applying for property preservation at the same time, freezing the account first and then negotiating, can often lead to a quick settlement and recovery of the money owed.
  • Establish a four-step traceability system for contracts, signing, reconciliation, and invoicing, clarify the settlement subject and delivery address, and reduce bad debts at the source.

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 limit.\nLegal services for creditor-debtor disputes·Beijing Henglue Law Firm