What does "dishonest subject" mean in a China company credit report?
Question
I saw in the credit report of a China company that the legal representative of a supplier was marked as a "person subject to breach of trust" and had a record of "restricting high consumption." I don't quite understand the legal implications of this mark and how much it actually affects supplier cooperation.
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"The person subject to breach of trust" is a relatively serious negative sign, and you must pay attention to this when you see it. Simply explain, when a person or company is ordered by a court to fulfill some obligation, such as paying back money or delivering goods. However, if the execution is refused if it is capable of execution, the court will include it in the list of persons subject to breach of trust. This list can be publicly found on the China Executive Information Disclosure website. At the same time, it is usually accompanied by measures to "restrict high consumption", that is, restrictions on flying, high-speed rail, staying in star-rated hotels, etc.
For suppliers, the legal representative being marked as a person subject to breach of trust will have multiple effects. The first is the level of integrity. If a person is sentenced by the court to refuse to pay back the money, it means that he has a history of default or breach of contract in business activities. If you do business with him, the probability of him subsequently breaking the contract is higher than that of ordinary people. The second is the level of operating capabilities; the legal representative is restricted, travel is restricted, business talks with customers and factory inspections are affected, and the company's operations may be abnormal as a result. The third is the risk transmission level; if the company itself is also a person subject to breach of trust, its bank accounts may be frozen, assets seized, and the deposit you made may be directly removed by the court.
According to my experience, the legal representative of some companies is not the real boss, but a nominal one. The real actual controller may find a relative or employee to serve as the legal representative to protect against risks. So when you see that the legal representative is marked as a person subject to breach of trust, you not only have to look at this person, but also check whether the company itself has any record of being executed.
When you investigate, you should pay attention to the amount of the execution target and the number of cases. If there is only one record and the amount is small, such as a contract dispute worth tens of thousands of yuan, it may be an accidental incident. But if a person has more than a dozen execution records and a total amount of several million yuan, it can basically be certain that this person is a person with a systematic habit of default.
This information can be found on both the China Executive Information Disclosure Network and the CheckChinaCompany platform.
Seeing the "person subject to breach of trust" mark, I suggest you at least ask the other party to give a reasonable explanation. If the explanation is vague or the default amount is large and the number of breaches is large, it is the best choice to change the supplier directly.
People Also Ask
What does "discredited judgment debtor" mean?
A "discredited judgment debtor" is commonly referred to as a "deadbeat debtor." It refers to an individual or company that has the ability to repay a debt but refuses to fulfill the obligations imposed by a court judgment. The court will place such entities on a discredited list and impose credit sanctions in accordance with the law. Simply put, if a judgment orders payment but the debtor fails to pay and intentionally evades the debt, they will be labeled as such.
How can you check if a company is a "discredited judgment debtor"?
The most authoritative source is the "China Enforcement Information Disclosure Network" (zxgk.court.gov.cn). You can find this information by entering the company name or its Unified Social Credit Code. You can also use the CheckChinaCompany platform to instantly view information on discredited status, enforcement status, and travel restrictions. Nowadays, many government procurement projects conduct on-site checks on the day of bid opening; bids from entities with such records are immediately deemed invalid.
What are the risks of doing business with a discredited entity subject to enforcement?
The biggest risk is that the other party may default on payments. After all, if they can delay paying even amounts ordered by a court judgment, there's certainly no guarantee they'll honor payments under a commercial contract. Furthermore, the assets of such companies may have already been transferred or seized, making it extremely difficult to recover debts in the event of a dispute. Therefore, you must check their credit history before entering into a partnership. If you discover they are a discredited entity subject to enforcement, avoid them at all costs, don't cut corners just to save time.