The Court of Final Instance (TUI) has recently decided a case about unpaid debt that involved two companies and their legal representatives.
According to the Office of the president of the TUI, the debtors had transferred two Macau housing units to their underage son. Their intention was to remove these assets from their proprietary ownership and, therefore, prevent the properties from being used to repay their debts.
The case dates from 2017 when a company owned by the two people could not repay a RMB5 million debt contracted in 2014.
At the time, the deal was to repay the debt within seven days, at a 10% per year interest rate.
Since the debt was never repaid, by March 2017, the debtors had accumulated an extra RMB2.17 million in interest, on top of the original RMB5 million loan.
At this time the owners and legal representatives of the debtor had assumed liability of the company debt but, before that (in 2015) they had, through a public deed document, announced the transfer of two housing units to the couple’s underage son.
Realizing they would unable to force repayment of the debt, the creditor filed a case with the Court of First Instance (TJB). The case had sought to declare the transfer null and void and declare the purpose of the transfer was to hide assets that could be used to repay the debt by putting them under the ownership of a minor.
The TJB dismissed the case having decided the actions were legal at the time. The creditor appealed to the Court of Second Instance, noting that, although the deeds were valid documents, the intention was not to transfer the properties to the son, but to remove the properties from the couple’s assets so they could not be used to repay debt.
After another appeal, this time from the debtors, the TUI finally concurred with the creditor’s position and declared the deeds null and void. It explained that the existence of the public deeds, “only proves the declarations of the contracting parties, stated before the notary,” adding, that this does not constitute “material proof of sincerity, veracity and validity of the statements issued by the parties” at that time.
