Meaning
Legal preservation orders issued by a People’s Court prevent the disposal of property before a final judgment is rendered. Parties often seek asset dissipation protection to secure bank accounts or real estate during a contract dispute. This measure stops the transfer of ownership to third parties while the main litigation proceeds.
The Civil Procedure Law of the People’s Republic of China governs the application process and the mandatory provision of a guarantee by the applicant.
Security Bond
Applicants must provide a financial guarantee or an insurance policy to the court before the preservation order is executed. This collateral covers potential losses incurred by the defendant if the asset dissipation protection is later found to be wrongful. Judges typically require the bond to match the value of the assets frozen, though variations exist in different provinces.
Domestic insurance companies frequently issue specialized litigation preservation liability insurance to meet this demand, allowing companies to preserve assets without locking up large sums of operational capital.
Execution Speed
Rapid freezing of accounts occurs once the court issues the formal ruling and delivers it to the relevant financial institution. Banks in China must comply immediately with these orders through an integrated electronic system connected to the judiciary.
Procedural Duration
Preservation orders remain valid for a fixed period unless the claimant requests a formal extension from the presiding judge. For bank accounts, the asset dissipation protection usually lasts for one year, while for real estate it lasts for three years. Failure to renew the application before the expiry date leads to the automatic release of the assets.
A court may lift the order early if the defendant provides a counter-guarantee.
