What Is an Annual Debt Service?

Debt settlement refers to the behavior of the debtor to fulfill his debts in accordance with the provisions of the law or contract to release the debt and debt relationship. Debt settlement is an important part of the corporate debt management process and a prerequisite for achieving continuous corporate debt management. At the same time, debt settlement is also an important financial task in the daily business activities of enterprises. For specific enterprises, debt settlement is conducive to maintaining a good reputation and laying the foundation for further corporate borrowing; it is conducive to strengthening the crisis awareness of the enterprise and enhancing the concept of corporate benefits; it is conducive to adjusting the financial structure of the enterprise in a timely manner and creating benefits Conditions for improving economic efficiency.

Debt settlement

Debt settlement is an inevitable phenomenon and an important link in the corporate debt movement, that is, borrowing, using, and paying off debts. To carry out good debt management activities, enterprises must abandon the current phenomenon of abnormal debt arrears among enterprises in China and follow some principles that should be followed in debt settlement.

(1) The principle of actual performance, also called the principle of physical performance, means that creditors and debtors must fulfill their respective obligations in strict accordance with the subject matter stipulated in the contract. In the performance of the contract, the performance of the contract cannot be replaced by other objects. The payment of liquidated damages and compensation for damages cannot replace the performance of the contract. Only in this way can we effectively ensure the orderly development of the production and operation activities of the relevant enterprises. Of course, if the actual performance cannot be performed due to force majeure and other reasons, it may be allowed to postpone the performance, partial performance or non-performance as appropriate.

(2) The principle of full performance, also called the principle of proper performance. The debtor must perform the debt in accordance with the time limit and method agreed in the contract, and may not arbitrarily advance, delay or change the performance method. In this way, the interests of creditors can be effectively protected.

(3) Cooperative performance principle. The parties to the claims and debts must unite, cooperate, help each other, and work together to fulfill their respective responsibilities and ensure the performance of the contract.

(4) The principle of compulsory performance. If the debtor does not repay the due debt, but it is not an exceptional liability, the law enforcement agency may force it to perform until it is liquidated. In this way, enterprises can be strengthened to strengthen their management and management, strengthen their awareness of the rule of law, and effectively avoid the anomaly of "don't worry about debts."

(5) The principle of effectiveness. It means that the debtor can reasonably choose the time and method of debt repayment under the circumstances of the law and the creditor's permission, so as to be beneficial to the person or harmless to the person.

Debt settlement means the method of canceling the debt-debt relationship. There are two main categories, namely the normal pathway and the special pathway.

(1) Normal route

The normal approach is the method used by the debtor to perform its obligations in accordance with the agreement. For example, the enterprise shall repay the bank loan in cash or bank deposit in full and pay the payment due to the supplier; pay the advance payment with the products or services of the right quality.

(2) Special approach

Due to the temporary debt repayment ability of the debt enterprise or the change of the agreed conditions, etc., the method adopted when the debt enterprise cannot perform its debts. Depending on the situation, there are the following ways:

Negotiation. It is a method by which the debtor is unable to perform the debt due, and after negotiation with the creditor, the creditor makes a concession, agrees to deferred repayment and relieves the debtor of default liability. In our law, this method of reconciling disputes is encouraged. Because, on the one hand, it is conducive to maintaining a good business relationship between debt and debt companies; on the other hand, it can avoid the expenses spent in other ways. However, this approach should only be used when creditors have sympathetic or optimistic expectations of the debtor.

Mediation. When the debtor cannot perform the debt due to the contract and cannot reach an agreement with the creditor, a method of mediation between the parties to promote understanding between the parties and reach a new agreement to resolve the debt. The specific forms are: administrative mediation, arbitration mediation, and judicial mediation. Regardless of the specific form of mediation, the mediation process must comply with national laws and policies, and reach an agreement that does not violate laws and policies on the premise that the parties are willing.

arbitration. The parties submit the dispute to a third party or a professional arbitration agency that has mutual trust and no direct interest, and both parties are obliged to perform the method of resolving the debt dispute. Although arbitration does not have a certain legal binding force, as a legal arbitration system, it still has a certain legal coercive force, that is, one party fails to perform the award within the prescribed time limit, and the other party can apply to the people's court for enforcement.

judgment. The two parties cannot resolve the debt dispute through negotiation or other methods. One of the parties brought a lawsuit to the court and requested the court to resolve the debt dispute through trial procedures. As a result, the debtor either fulfills the original debt or pays liquidated damages to the other party and compensates the creditor for the losses caused by the debt. It is a means of coercion, that is, if a party who has a legally effective judgment has the obligation to perform, it should perform it automatically. .