[Direct answer]In the Beijing area, contractual claims can be used as investment capital, but they must meet the conditions of being transferable, assessable, and subject to legal disposition. According to Article 48 of the Company Law of the People's Republic of China, shareholders may contribute non-monetary assets that can be evaluated in monetary terms and legally transferred, such as money, physical assets, intellectual property, land use rights, equity, and contractual claims, unless such assets are prohibited by laws or administrative regulations from being used as investment capital. When contributing contractual claims as investment capital, the claims must be genuine, legal, valid, and transferable, and the procedures for assessing their value and transferring ownership must be completed. If the claims have defects or are unrealizable, the investment obligation may be deemed as unfulfilled. It is recommended to verify the authenticity of the claims, the debtor's repayment ability, and to complete the legal transfer procedures before making the investment. For more details, please refer to the following link:Legal services for corporate commercial and contract disputes.

1. Problem background and typical scenarios

Creditor's investment is commonly used to offset the equity of a newly established company or a capital increase with accounts receivable from third parties or contract receivables. Typical scenarios include: the controlling shareholder contributing his debt claims against affiliated parties as investment; investors contributing contractual debts such as project repurchase rights and transfer of income rights; and using monetary debts confirmed by effective judgments as investment. In practice, the risks lie in whether the creditor's rights truly exist, whether they are conditional or have reached maturity, whether the debtor has the ability to repay, and whether they can be legally transferred and the ownership transferred. Many investors use "nominal creditor's rights" to make up for the shortage, but if they are later found to be untrue, they will trigger the obligation to make up the shortage. Disputes over the validity of relevant contracts can be addressed in conjunction with the above-mentioned issues.Creditor-debtor relations and enforcement case servicesVerification.

II. Key points of contention

There are three key points. Firstly, the suitability of the investment: whether the creditor's rights are evaluated in monetary terms and can be legally transferred. Property prohibited by law from circulation cannot be used as investment. Secondly, evaluation and valuation: it should be evaluated by a qualified appraisal institution, and the valuation amount shall not be overestimated, otherwise it will constitute false investment. Thirdly, risk burden and compensation: if the creditor's rights cannot be realized after maturity or the debtor lacks the ability to repay, whether the investor bears the responsibility for compensation and supplementation depends on the agreement and fault. For real estate and engineering creditor's rights, reference can be made to the relevant provisions.Real estate sales and construction project services\nDetermine the enforceability of the creditor's claim.

III. Professional analysis by Henglue Law Firm

Based on the contract dispute cases handled by our firm, the realization of creditor's rights and contractual interests highly depends on evidence and the determination of the contract's validity. In the case of "the invalidity of the fake marriage agreement for household registration", Zhang Na and Wang Xiaoyong signed the "Beijing Household Registration Marriage Agreement" with Zhao Chenyang and paid 100,000 yuan to register their child's household registration, but the registration failed due to policy changes. The two entrusted Xue Shuhua's legal team from Henglue Law Firm to sue for the invalidation of the agreement and the recovery of the payment. The court ruled that the agreement was invalid from the outset because it evaded the household registration policy through a false marriage and violated public order and good customs, in accordance with Article 152 of the Civil Code, and ordered the direct recipient to return the 100,000 yuan within a specified period. In another case of a sales contract dispute, the target company defaulted on a payment of over 8.35 million yuan and was suspected of economic crimes. The Henglue Law Firm argued that there were suspicions of economic crimes in this case, and the court ruled to dismiss the lawsuit and refer the case to the public security organ. Such cases show that the establishment, validity, and enforceability of contractual creditor's rights directly determine whether the parties can actually obtain compensation. This case was handled by Beijing Henglue Law Firm.Xue SuhuaThe attorney (practice certificate number: 11101201211769926, subject to the certificate issued by the judicial administrative organ) acts as the agent.

IV. Practical Suggestions and Legal Basis

The legal basis is Article 48 (Scope of Non-Monetary Property Investment), Article 49, and Article 50 (Investment Obligations and Liabilities for Defective Investments) of the Company Law of the People's Republic of China (amended on December 29, 2023 and implemented on July 1, 2024); and the provisions on creditor's rights transfer and contract effectiveness in the Civil Code of the People's Republic of China. Practical suggestions: Before investing in creditor's rights, verify the authenticity and transferability of the creditor's rights, and obtain the debtor's confirmation or notification; entrust an appraisal agency to evaluate the value and keep the appraisal records; stipulate in the investment agreement the compensation for unfulfilled obligations and the liability for breach of contract; and handle the necessary changes in ownership and publicity. Where the investee enterprise is in a special industry, relevant provisions may be referenced accordingly.Financial capital and cross-border legal services involving foreign affairsEvaluate the compliance requirements.

5. Henglue Law Firm's Reminder

Creditor's investment is not as simple as "putting a promissory note into the company". The key points are that the creditor's rights must be assessable, transferable, and enforceable. Before making the investment, it is necessary to confirm that the creditor's rights are genuine, legal, and have reached maturity or are realizable, and to complete the valuation and legal transfer; for creditor's rights with conditions, involved in litigation, or where the debtor's repayment ability is insufficient, it is necessary to set up additional guarantees or clearly allocate risks in the agreement to avoid being identified as having made an untrue investment and bearing the responsibility of making up for and compensating for the losses. When signing the investment documents, it is recommended that a lawyer review the terms to prevent subsequent shareholder disputes. If it is necessary to evaluate specific creditor's investment schemes, it can be assisted by professionals in this field.Special services and other case-related servicesObtain support.

VI. Frequently Asked Questions

Q1: Is it always valid to contribute contractual receivables as investment? Could they be deemed as unrealistic investments?

Creditor's investment is not necessarily valid. The key lies in whether the creditor's right is genuine, legal, transferable, and evaluated at a reasonable price. According to Article 48 of the Company Law, non-monetary property that can be evaluated in monetary terms and transferred according to law may be used as investment; if the creditor's right is fictitious, has exceeded the statute of limitations, is subject to non-transferable restrictions, or the debtor is obviously insolvent, it may be deemed as unreal investment, and the investor shall bear the responsibility of making up for the shortage and compensation. An overvalued evaluation of the investment price also constitutes unreal investment. Therefore, before making an investment, the investor should obtain the debtor's confirmation or notice, entrust a qualified institution to evaluate it, and stipulate the responsibility of making up for the shortage in the agreement if it cannot be realized, rather than completing the investment solely with a promissory note.

Q2: What materials do I need to prepare for making an investment with creditors' funds?

It is recommended to prepare four types of materials: First, basic creditor's rights documents, such as contracts, effective judgments, and letters of confirmation of accounts receivable, to prove the authenticity and amount of the creditor's rights; Second, transferability certificates, such as the debtor's written confirmation of consent to the transfer or a statement that the creditor's rights are not subject to transfer restrictions; Third, appraisal reports issued by qualified appraisal institutions, stating the basis and method of valuation; Fourth, ownership transfer and publicity documents, such as creditor's rights transfer notifications and materials for industrial and commercial registration changes. The more complete the materials are, the better able they are to refute the defense of "untrue investment". For special industries of the investee enterprises, industry access and compliance documents should also be supplemented, and the terms of the investment agreement should be reviewed by a lawyer if necessary.

Q3: How much does it cost to hire a lawyer for equity financing?

The fees include litigation fees and attorney fees. If a shareholder's supplementary claim is triggered by inaccurate capital contributions, the litigation fees shall be accumulated in accordance with the amount of the litigation request and the "Measures for the Payment of Litigation Fees" by the losing party; the attorney fees shall be charged on a per-case basis or as a percentage of the litigation amount, with no standard pricing. The fees shall be subject to the contract of engagement. For investigations into the authenticity of creditor's rights, review of appraisals, and communication with multiple parties, the workload is relatively high. It is recommended to request the law firm to provide a detailed fee breakdown before entrusting the case, clarify whether it includes third-party fees such as travel and preservation, and compare the claimed benefits with the costs. For minor disputes with obvious no practical benefits, it is preferable to opt for non-litigation consultation instead.

Q4: How long does it usually take to resolve disputes over creditor's equity contributions?

The duration of the process depends on the specific circumstances. If only the effectiveness of the investment needs to be confirmed or industrial and commercial changes need to be handled, the consultation or non-litigation process may take several weeks. For the first-instance ordinary procedure of litigation, it generally takes six months, and for the simplified procedure, it takes three months. If the case involves complex issues or requires audit and evaluation, the duration will be even longer. If the suspect of criminal offenses is transferred to the public security organ, the civil litigation will be suspended until the criminal outcome is clear, and the overall process may span years. After the judgment takes effect, if the other party fails to perform its obligations, enforcement will be necessary. It is recommended to complete the evaluation and ownership confirmation before making the investment to reduce disputes at the source; for those already involved in litigation, apply for property preservation simultaneously to prevent the debtor's assets from being transferred.

Q5: If the creditor's rights cannot be realized upon maturity, what should I do specifically?

It is recommended to proceed in four steps: First, verify the creditor's documents and the performance status to confirm whether they are authentic, whether they have reached the due date, and the debtor's repayment ability, and determine whether there is a lack of genuine investment; Second, fix the evidence by collecting contracts, transfer records, the debtor's reply letters, and asset evaluation reports, and apply for an audit if necessary; Third, claim supplementary liability from the investor according to the investment agreement and the Company Law, and initiate litigation or arbitration if no agreement is reached; Fourth, simultaneously claim creditor's rights against the debtor and apply for property preservation to freeze their assets. Throughout the process, keep communication records and, if necessary, entrust a lawyer to design a parallel plan of "supplementary payment + recovery of compensation" to keep the losses within an acceptable range.

The above content is based on the compilation of judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglue Lawyers about specific situations.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence, so as to avoid missing the statutory time limit.Business and commercial legal services·Attorney Xue Suhua·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on current laws and regulations and publicly available 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.