Delayed and incorrect payments by business partners are common challenges in business operations. In such cases, what should businesses do to protect their rights? In the following article, TNTP’s lawyers will provide insights into what businesses should do when dealing with partners who delay payments.

1. Negotiate and Request Payment from the Debtor

When a business partner delay payments, the business must take action to ensure the partner is aware and fulfills their payment obligations. In such situations, the business should regularly communicate with the partner, proposing payment solutions and discussing possible adjustments to payment deadlines to reach an agreement that best ensures the interests of both parties.

The negotiation process involves a variety of tasks, including making phone calls, holding face-to-face meetings, or sending formal written requests to the debtor who is delay payments. These actions may need to be carried out repeatedly or on a scheduled basis, depending on the value of the debt and the relationship between the business and the partner, to ensure effective resolution.
Negotiating and requesting payment also serves the purpose of gauging the debtor’s willingness to cooperate. If the debtor demonstrates an uncooperative attitude, continues to be evasive, or provides no feedback regarding the repayment, the business should consider initiating legal proceedings to safeguard its rights.

2. Initiate a Debt Recovery Lawsuit

Initiating a lawsuit becomes necessary when a business determines that the debtor has the financial capacity to make payments but is unwilling to do so. To file a lawsuit, the business needs to submit a legal complaint to the authorized dispute resolution agencies, requesting these bodies to compel the delinquent partner to settle the outstanding debt by legal regulations.

The choice of the dispute resolution agency depends on the content of the contract/agreement between the business and the partner. If the contract/agreement specifies the selection of a commercial arbitration center for dispute resolution, the business must submit the legal complaint to the competent Commercial Arbitration Center. Conversely, if the parties do not agree on choosing an arbitration center in the contract/agreement, the business will file a legal complaint with the competent court for dispute resolution.

After reviewing the legal complaint and the documents and evidence submitted by the business, the dispute resolution agencies may issue a Verdict/Decision or an effective Legal Ruling. This Verdict/Decision or Legal Ruling can be enforced by the competent enforcement agency, and in doing so, the enforcement agency will use the state’s authority to take necessary measures to compel the partner to fulfill payment obligations, as well as any other relevant obligations as stipulated by the law.

3. Requesting Bankruptcy Proceedings

This is a measure similar to filing a lawsuit with dispute resolution agencies; however, the fundamental difference is that the partner may be declared bankrupt, and all of the partner’s assets may be sequestered and liquidated to fulfill the debt obligations owed to the business.
According to Article 5, Section 1 of the 2014 Bankruptcy Law, concerning the party entitled to submit a petition to initiate bankruptcy proceedings, an unsecured creditor or a partially secured creditor has the right to file a petition for bankruptcy proceedings when three months have passed since the due date of the debt, and the business or cooperative has failed to meet its payment obligations.

Therefore, if the partner does not cooperate in making payments after the three-month period from the due date of the debt has elapsed, the business, as the creditor, can file a petition with the competent court to initiate bankruptcy proceedings against this partner. After the court accepts and issues a decision to commence bankruptcy proceedings, the judge and the trustee in charge of the case will take necessary measures to manage and liquidate the partner’s assets and distribute the remaining assets to the business, as well as fulfill other obligations that the business has not yet met, such as tax obligations, salary debts, social insurance, or other financial obligations to government agencies.

From the above content, it can be seen that businesses have various options to resolve debts with partners, depending on their purpose and implementation capabilities. Businesses can consider choosing the appropriate measures to safeguard their interests.

The above represents the perspective of TNTP lawyers on the topic: “What Businesses Should Do If Partners Delay Payments.” It is hoped that this article brings benefits to the operations of businesses.