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O’Melveny & Myers Publishes Paper on Enforcement on Defaulted Loans and Mortgage on Real Property under Chinese Law

January 1, 0001

 

For investors targeting China for distressed opportunities, enforcement of defaulted loans and mortgages has always been a significant issue requiring careful understanding and analysis. In theory, an investor underwriting an investment in distressed debt might look at the collateral package itself for evaluating the collateral; in reality many participants in China’s non-performing loan auctions find that the value of collateral in China is seriously compromised by hurdles to enforcement.

O'Melveny has advised many distressed investors in structuring inbound investments and on making enforcement actions in China. Understanding the legal requirements of enforcement — as well as discrepancies and uncertainties in local practices — is vital for investors to understand as they consider investment strategies, and to avoid pitfalls when they seek to enforce a collateral interest in China. In this article, we discuss the enforcement of collateral interest and common issues that creditors have experienced in enforcement actions in China, including: 

  • What are the legal proceedings required for an enforcement?
  • Are there any non-litigious options for securing enforcement?
  • In what circumstances can a creditor obtain a property preservation order to prevent a debtor from moving or transferring property?
  • What is the general procedure and timeline applicable to judicial compulsory enforcement proceedings?
  • How does court auction work during an enforcement action?
  • What is the treatment of collateral interests in land use rights and buildings, construction-in-progress and pre-sale property?
  • What are the restrictions on the enforcement of collateral interest in land use rights and construction-in-progress?

To discuss any aspect of this article, please contact Walker Wallace or any of the other authors listed at right.

Click here for a PDF copy of the report.


This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. O'Melveny professionals contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

O'Melveny & Myers LLP is a foreign law firm registered with the Ministry of Justice of the People's Republic of China. Under current Chinese regulations, we are allowed to provide information concerning the effects of the Chinese legal environment, but we are not authorized to practice Chinese law or to render legal opinions in respect of Chinese law. We work in cooperation with a number of Chinese law firms. Should you require a legal opinion in respect of any Chinese law matter, we would be happy to assist you in obtaining one from a Chinese firm.

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