Kenosha Reporter

Citadel Law Group, SC issued the following announcement on June 10.

As Mandarin Oriental Taipei announced that it submitted a mass redundancy plan to the Department of Labor of Taipei City Government on May 28, 2020, it represents that more and more businesses in Taiwan may be facing financial crisis which may lead to liquidation, reorganization, or even bankruptcy in the near future. Before any liquidation, reorganization, or bankruptcy procedures begin, creditors have to understand the best practice to secure their credits when all of us are being impacted by COVID-19.

In short, the best practice is to apply for provisional attachment on the debtor’s assets to ensure that the creditor will have more leverage to negotiate with the debtor, and, more importantly, that the assets will be used to pay back the money owed to the creditor.

Under Article 522 of the Taiwan Code of Civil Procedure, a creditor may apply for provisional attachment for purposes of securing the satisfaction of future enforcement before filing any lawsuit when FIND MORE LEGAL ARTICLESSEARCHhis claims are monetary or his claims could be transformed to monetary claims. If the court approves the creditor’s application for provisional attachment, the creditor may trace the debtor’s assets with the court’s order via the Tax Bureau’s electronic system. When the debtor’s assets like the bank accounts and the real estate are attached because of the court’s order, the creditor will obtain the upper hand during the negotiation and the litigation. That is to say, the debtor will face huge pressures when all his cash or properties are frozen by the provisional attachment. As to the creditor’s cost for initiating such provisional attachment procedures, it is almost entirely in the creditor’s favor in Taiwan because the court will only charge the creditor around USD 35 regardless of the amounts of the claims owned by the creditor.

To satisfy the requirements of the provisional attachment, Section 1 of Article 523 of the Taiwan Code of Civil Procedure states that the creditor must show there will be the “impossibility or extreme difficulty” when enforcing the court’s judgement in the future. As it is hard to delineate the “impossibility or extreme difficulty” standard, Section 2 of Article 523 directly provides for an example that such standard shall be deemed satisfied when the creditor has to enforce the judgement in a foreign country. However, the court limits the scope of Section 2 of Article 523 so that it will apply only when all the debtor’s assets are located out of Taiwan. 98 Taiwan High Court Kang 1102 (2009) (stating that debtor used the creditor’s loan for a Hong Kong company cannot satisfy the standard under Article 523).

In practice, the court tends to approve the provisional attachment application when the debtor fails to reply the creditor’s demand letter issued by a lawyer or rejects creditor’s appropriate requests in such a letter. See 98 Supreme Court TaiKang 746 (2009). Consequently, it is always a good strategy for the creditor to use a demand letter to initiate the negotiation process, the subsequent provisional attachment application, and litigation. Moreover, the court will be more likely to approve the provisional attachment application where the creditor’s claim exceeds a certain amount of money. The rule of thumb is that any claim over approximately USD 200,000 with good cause of action will be more likely to get a court’s approval for provisional attachment. In addition, the Taiwanese courts generally would state that whether the debts are substantially more than the debtor’s assets is one of the reasons why the provision attachment application is approved. See 99 Supreme Court TaiKang 175 (2010). However, in such situation probably the creditor will not get any benefits from the provisional attachment and the subsequent litigation because the debtor’s assets cannot cover the credits owed to all the creditors.

All in all, in Taiwan, issuing a demand letter to the debtor before taking any legal action will get more benefits than you can imagine for the creditor, especially when you would like to ensure that the debtor’s assets will be used to pay your money back.

Hung Ou Yang, Esq., Managing Partner of Brain Trust International Law Firm, specializes in transnational legal disputes, corporate law, business and white collar crime, business transaction, antitrust, and arbitration. Hung Ou Yang has successfully resolved many high-profile civil, criminal, and transnational disputes, including but not limited to advising Amlogic for their regulatory compliance in Taiwan for their IPO in Shanghai, advising Ferrari with regard to trademark infringement, representing Hyundai Steal company for an anti-dumping investigation initiated by CSC regarding carbon steel plate, representing CIC in a civil complaint concerning pesticide-contaminated land leased by RT-Mart, and representing an internationally-renowned scholar for transnational property litigation both in the U.S. and in Taiwan. In 2019, Asia Business Law Journal identifies Hung Ou Yang as Taiwan's top 100 lawyers (The A List).

Original source here.