Study Of The Transfer Of Legal Issues Of Asset Securitization Assets

Asset Securitization is one of the finance innovations with the greatest influence and playing a more and more role in international finance market. Asset Securitization is a kind of financial arrangement of issuing securities based on the credit of certain assets that can engender future cash flow to pay for securities capital. Different from traditional financing methods, Asset securitization bases the issuing of securities on independent asset credit other than enterprise credit so as to keep the independence of the assets. The essence of Asset securitization is to remote the assets from the risks of the originator (original beneficiary). In securitized asset transfer, risk-remote is achieved when the originator tranfers the assets to SPV. Therefore, it is of great importance to have a thorough study on asset transfer in securitization.This dissertation carries out a systematic study of legal aspects of asset transfer in securitization, analyzes its fundamental system and existing problems as well as puts forward legislative suggestions on the improvement of relevant systems. As one of the active participant in asset securitization, the legal system of China with regard to asset securitization "witnesses a gradual construction and improvement under the circumstances of finance internationalization. However, its relevant legal system is not developed and rational enough since the practice of asset securitization in China is in the initial stage. Therefore, with reference to the international developed legislation and in combination of China's practice in asset securitization, the author finds that there exist some problems in asset transfer in the process of asset securitization and analyzes the deep-rooted reasons in legal system for these problems, then poses several suggestions on the improvement of relevant legislation.Chapter one, the basic theory of Asset transfer in securitization is the foundation for this paper. Since the scope of this dissertation is "financial credit assets", the nature of asset transfer in securitization is debt transfer. The value of asset transfer is risk-remote. The features of asset transfer in securitization are its specific requirements with respect to the subject, object and effect of transfer, which distinguish it from ordinary credit transfer. Chapter two, three and four respectively analyze the above legal issues.Chapter two is mainly about the subject of asset transfer in the process of asset securitization. The legal system of transferee, namely, Special Purpose Vehicle (SPV) is very special. Although the SPV is an economic entity, it is different from other ordinary economic entity because of its special purpose. The purpose of SPV to transfer the asset to originator is to separate the securitized assets from other assets of the originator so as to lower the risk ratio of securitized assets and improve the credit rank of asset-backed securities. If SPV goes bankruptcy after the practice of asset transfers, the aim of lowering the risk of assets cannot fulfill, therefore, SPV in itself must be the entity far from bankruptcy, namely risk-remote, the achievement of which relies on its internal control system. There are two types of SPV: Special Purpose Company and Special Purpose Trust, in the meanwhile, the internal control system of these two types is different. Special Purpose Company puts emphasis on preventing the bankruptcy risk, while Special Purpose Trust pays more attention on the supervisation over the practice of trustee to put the truseted assets into use. In China, there exists many barriers on the construction of SPV legal system and China chooses the type of Special Purpose Trust. However, the relevant legislation in terms of Special Purpose Trust is fragile and the disadvantages of Chinese Special Purpose Trust system range from over-loaded responsibilities on the part of trustee, overflow of principal powers, beneficiary's meeting system in need of improvement, etc. The reason of the above disadvantages is that without a well-rounded Special Purpose Trust law, we have to refer to trust law in many cases, while the vast body of provisions in trust law is incapable of meeting the demands of Special Purpose Trust. This Chapter then makes recommendations on the structure of Special Purpose Trust legislation, suggesting on adopting separate legislation, restricting the powers of principal, further improving trust supervisor system and beneficiary system, etc.Chapter three touches upon the topic of object of asset transfer in securitization. Section 1 gives an overview of the object of asset transfer -basic assets, describing the features and scope of securitization assets. This section begins with the features of foreseeability and transferability of securitization assets, while the emphasis is put on the agreement of credit transfer and legal restriction in respect of the transferability. Then, this section carries out a study on the scope of securitization assets, with an emphasis on future credit transfer and transfer of secured rights and interests. The remaining three sections further discuss the above three issues. Section 2 focuses on the agreement restriction and legal restriction on transfer. Based on a comparative study of various legislations in a number of major states, this section studies the above restrictions within Chinese credit transfer system and makes recommendations on improvement. Section 3 carries out a profound study on future credit transfer, which area is still a blank in China. Based on a comparative study of legal systems in typical countries, the author puts forward legislative suggestion in this direction, holding to grant transferability to future credit, to define the effectiveness point of future credit transfer at the time of contract execution and adopt registration system for future credit transfer. Section 4 analyzes the transfer of secured rights and interests. Secured rights and interests shall be conveyed along with the principal credit, which opinion is.adopted by China as well. Based on an overview of fundamental theories regarding transfer of secured rights and interests, this section concentrates on the provisions about mortgage transfer posing a disadvantage to securitization and possible resolutions.Chapter four studies the effect of securitized asset transfer, namely, bankruptcy-remote. Section 1 gives a detailed analysis of the bankruptcy-remote system. First of all, this section points out the manners of transfer are novation, assignment, trust and sub-participation.Then, this section analyzes the bankruptcy-remote system. Bankruptcy-remote requires that transfer shall meet the requirements for a true sale. That's why the author tries to hold a discussion on the criteria for identifying a true sale. Then it carries out a study of the legal risk of bankruptcy-remote system, namely, recharacterization of transfer and favorable transfer and fraudulent transfer before bankruptcy. Section 2 probes deeper into the application of bankruptcy-remote system in China. It begins with pointing out the manner of transfer in China is trust; then this section analyzes the following legal risks of bankruptcy-remote in China: void trust, cancellation of trust, void transfer upon originator's bankruptcy and cancelable transfer. Furthermore, this section, taking into consideration of the enactment of new bankruptcy law in China, analyzes the differences between the old and new version of bankruptcy law, pointing out that the new one claims reasonableness in bankruptcy creditors protection and such change increases the risk that transfer before bankruptcy would be determined void or cancelable. The second part of this section studies the systematic disadvantages of Chinese bankruptcy-remote systeme. This part begins with an analysis of certain typical securitization cases in China, including Huarong NPL securitization case, Jianyuan house-mortgage loan securitization case and Kaiyuan credit assets securitization case. Based on vast case studies, the author discern the systematic disadvantages in bankruptcy- remote, including the effective time of trust transfer, publich notice system of trust transfer, consideration for trust transfer, etc. Regarding the above issues, the third part of this section put forward relevant legislative suggestions.Chapter five carries out a thorough analysis of the advanced legislation in the field of asset transfer, namely United Nations Convention on the Transfer of Receivables in International Trade, pointing out what China shall learn from the Convention and suggesting to carry out unified legislation in this area.Chapter five carries out a thorough study on Convention on the Transfer of Receivables in International Trade, the uniform law on international securitized asset transfer. The Convention set out many advanced provisions on securitized asset transfer. The dissertation puts its emphasis on agreement restriction and legal restriction, transfer of future receivables, transfer of secured rights and interests, priority of transfer, etc. that the Convention deals with. Among all these, the author pays special attention to the priority system established by the Convention, pointing out the weakness of conflict law in regulating priority relationship and putting forward a constructive suggestion to set up registration priority system as well as proving the feasibility of establishing such priority registration system. Facilitating the development of securitization is a leading idea of the Convention, which shall be adopted in our domestic legislation as well. However, the Convention is not made specially for asset securitization, so the author puts forward an idea of uniform legislation on securitized asset transfer.Then the author makes a summary of the dissertation and gives a concise conclusion.