TerraLex Cross-Border Guide to Guide to Tracing Assets Around the World

In Mainland China the registration information of companies is publicly available. It may also be possible to obtain the ownership details for real property if an interested party files an application with the relevant government agencies. Any further asset tracing will usually be limited to the litigants to the civil case. In order to preserve a respondent’s assets during litigation proceedings, the People’s Court can grant a freezing injunction either before or during the trial. After the trial, in the enforcement proceedings, a search order can be granted by the People’s Court if the respondent refuses to fulfill his obligations and conceals his assets on purpose. Nevertheless, assets can only be frozen or traced within the jurisdiction of Mainland China in most civil cases.

Companies incorporated in Mainland China are required to submit their registration information when established. Such information is available online via the National Enterprise Credit Information Publicity System (in Chinese only).

As for real estate, the Chinese real estate registration agency provides information upon an application by a relevant interested party. The ownership of unregistered housing or land use rights will be determined in accordance with approval documents and other relevant evidence.

As against third parties Except for the public system mentioned above, asset disclosure in a civil case is usually limited to the litigants. However, it is possible to trace the assets belonging to a third party under certain circumstances.

In civil enforcement proceedings, the respondent is obliged to declare his financial condition. If the personal property of the respondent is in the possession of a third party, or if other property rights of the respondent are registered under the name of a third party, such situations will be reported by the respondent. Therefore, the third party will be identified as the asset holder.

Moreover, a third party may also be disclosed as an asset holder in the case of subrogation. If a respondent is unable to settle the debts but still has claims due from a third party, the People’s Court may inform the third party to perform the obligation towards the applicant, or deliver an asset freezing injunction. Under such circumstances, the third party will disclose his assets.

As against the wrongdoer

Under Civil Procedural Law, the respondent must report the current status of his property and his property status for the previous year. If the respondent refuses to report or makes a false report, the People’s Court will impose a fine or detention on the respondent. Moreover, the People’s Court can also enquire about the respondent’s assets, such as bank deposits, debentures, shares, unit trusts, etc from the relevant organizations (eg banks and credit unions).

If the respondent conceals his assets intentionally in the enforcement proceedings, the People’s Court has the right to issue a search order to trace his assets.

Moreover, a “wrongdoer” may also refer to someone who is blacklisted as a dishonest person subject to enforcement in Mainland China. Such person, according to Supreme People's Court, will be unable to travel by plane, sleeper train or high-speed trains etc. He will also no longer be able to consume any other luxuries either.

Under the Civil Procedure Law, the People’s Court may rule on preservation before or during the trial.

However, in practice, the People's Court adopts a stricter attitude towards pre-trial preservation. The courts in Beijing, for example, have rarely ruled in favour of pre‐trial preservation.

Yes, steps can be taken to protect the assets on an interim basis. Preservation is an interim measure for cases where the behaviour of the respondent may make enforcement of a judgment difficult. Under the Civil Procedure Law, the People’s Court may rule on preservation before or during the trial.

However, in practice, the People's Court adopts a stricter attitude towards pre-trial preservation. The courts in Beijing, for example, have rarely ruled in favour of pre‑trial preservation.

The requirements for obtaining a freezing injunction depend on the stage of the proceedings. As regards a freezing injunction granted in a preservation ruling before or during the trial, the requirements are:

• The action of the respondent may make enforcement of a judgment difficult

• There must be a ruling of the People’s Court or an application by an interested party, and

• (i) if the freezing injunction is granted before the trial, the interested party must provide a guarantee/deposit; or (ii) if the freezing injunction is granted during the trial, the People’s Court has discretion to decide whether the interested party shall provide a guarantee.

A freezing injunction may also be granted after the judgment become effective and before the enforcement proceedings, where the judgment may become unenforceable or difficult to be enforced in any emergencies including transfer of property.

The People’s Court may seal up, distrain or freeze movable property possessed by the wrongdoer and immovable property or other property rights registered in the name of the wrongdoer.

In circumstances where the assets are held by a third party, if such third party confirms in writing that the property belongs to the wrongdoer, or if the third party is actually holding the assets for the respondent’s benefits, then the People’s Court may seal up, distrain or freeze the assets held by him.

The People’s Court cannot freeze certain types of assets, including but not limited to clothing, household goods, and other necessities required for the respondent’s daily life.

Where a respondent does not perform his obligations under a judgment and conceals property on purpose, the People’s Court has a right to issue a search order and conduct a search on the respondent and his residence (or the place where the properties are concealed). The search order must be issued within the jurisdiction.

A freezing injunction or search order cannot be obtained in support of ongoing proceedings outside of the jurisdiction due to the principle of judicial sovereignty. In principle, only a judgment or ruling made by a foreign court which has come into legal effect may be ratified and enforced by the People’s Court.

However, there is one exception. According to Law of the People's Republic of China on the Special Procedure for Maritime Litigation, the People’s Court has the power to grant a freezing injunction relating to the preservation of maritime claims in support of an ongoing trial or arbitration outside of the jurisdiction.

If the freezing injunction is an interim method to preserve the assets during proceedings, the freezing injunction will not be enforceable in most circumstances (as explained above).

If the freezing injunction is a part of a final judgment or ruling made by a foreign court, or a final arbitration award made by a foreign tribunal, which has been recognized by the competent People’s Court (in accordance with a relevant international treaty or the principle of reciprocity between China and the foreign country) the freezing injunction will be enforceable in China. Furthermore, the enforcement of the freezing injunction must also comply with the basic principle of sovereignty, security and public interest. Otherwise, the judgment or ruling made by the foreign court shall not be recognized or enforced in mainland China.