Measures for Chattel Mortgage Registration will come into force on September 1 2016

With the increasing needs of financing and transitions of commodities, the disputes on the chattel mortgage are increasing rapidly. In order to protect the guarantee of the creditor’s rights more effectively, recently, the SAT has amended the Measures for Chattel Mortgage Registration. The highlights of the amendment are as follows:

To clarify that the right to chattel mortgage shall be established when a chattel mortgage contract comes into force

Article 2 has added that ‘the right to chattel mortgage shall be established when a chattel mortgage contract comes into force’. In order to avoid the disputes on whether a chattel mortgage contract shall come into force after it has been registered, the article has further specified that the chattel mortgage contract shall come into force according to the ‘Contract law’, which says that the right to chattel mortgage shall be established when the chattel mortgage contract has been signed or satisfied prescribed conditions in the chattel mortgage contract.
To further protect the creditor’s rights

Article 3 has added that ‘the establishment, modification and annulment of chattel mortgage registration could be handled by a party to the chattel mortgage contract as a representative with a registration authority.

In practice, in order to avoid the noncooperation from the debtor in handling the chattel mortgage registration after signing the chattel mortgage contract, the creditor shall take advantage of this article, and stipulate in the chattel mortgage contract with the clause that requires the debtor to provide the relevant documents and pre-sign the relevant documents for the registration.

The amendment has added Article 12, which states that upon the application of the contracting party or the interested parties, the registration authority could alter or annul the relevant chattel mortgage registration by applying the legal document of the people’s court or arbitration commission or a requisition decision of the people’s government, etc.