Purchase Money Security Interest Registration Timelines in PBOC System
Registration within ten days of physical delivery grants purchase money security super-priority over prior floating charges under PRC Civil Code Article 416.
Retention of Title
Meaning
A protective legal mechanism allows a seller to maintain legal ownership of goods until the buyer has paid the purchase price in full. This retention of title clause is commonly inserted into sales contracts to protect suppliers against buyer insolvency. The buyer obtains possession and the right to use the goods, but the seller retains the underlying property rights.
This arrangement protects the seller’s financial interest during deferred payment terms.
Contractual Provision
The agreement must contain specific language that clearly states when and under what conditions the ownership transfers to the buyer. In the context of retention of title, the contract must define whether the clause applies only to specific goods or to all outstanding balances. This distinction is important because courts require precise wording to enforce the claim against third parties.
The supplier must ensure the contract is signed by an authorized representative of the buying company.
Registry Filing
Registration of the ownership claim is necessary in many jurisdictions to make it effective against subsequent buyers or bankruptcy trustees. Under the rules for retention of title, the seller should register their retained interest in the movable property registry to secure their priority. This filing alerts other creditors that the buyer does not actually own the machinery or raw materials on their factory floor.
The registration must be updated regularly to reflect ongoing sales and payments.
Default Protection
The seller has the legal right to repossess the goods from the buyer’s premises if the buyer fails to pay by the agreed deadline. Under the statutory rules of retention of title, the seller can demand the return of the specific items rather than suing for unpaid money. This repossession right is particularly valuable if the buyer enters liquidation proceedings, as it allows the seller to reclaim their physical assets before unsecured creditors are paid.
The reclaimed goods can then be resold to recover the outstanding balance.