Legal Research On Special Purpose Vehicle

Asset-backed securitization transactions have become a widely favored method of finance. It refers to a specific form of financial transaction in which an originator pools certain types of illiquid assets (typically loans or receivables) and transfers them to a special purpose vehicle ("SPV"). The SPV, in turn, issues securities backed by the transferred assets to investors, and pays them of these asset backed securities ("ABS") interest and principal out of the cash flow arising from the underlying assets.SPV is the core factor in the securitization. As the vehicle of risk remote, SPV is designed to separate the asset supporting securitization from the bankruptcy of the originator and SPV itself. There are three forms to realize the function, which are Special Purpose Trust ("SPT"), Special Purpose Company ("SPC") and partnership. SPT and SPC are more popular than partnership around the world.In China, all types of SPV are contradicted with current law to a certain extend. Comparatively, SPT is the most feasible way to realize the asset backed securitization. In April 2005, "The Management Measure of Credited Asset Securitization" has been issued by the People's Bank of China Centre Bank and China Banking Regulatory Commission, as the first special legislation, which filled the space of the asset-backed securitization in China. Therefore, this paper focuses on the research of SPV, analyzes both advantage and disadvantage of SPT and SPC, and provides a little suggestion for the legislation of Asset-backed Securitization in China. It is hoped to be a reference for China's Asset-backed Securitization development.This paper develops in four parts as follows: The first part summarizes the theory of SPV. It begins with introduction of the conception of Asset-backed Securitization. Then, it discusses the essence and types of SPV in detail. The second part probes into the value of SPV, which is to realize the bankruptcy remote. On the basis of practical experience, the third part illustrates the legislative obstacle to progress of Asset-backed securitization in our country. The fourth part refers to advanced experience in foreign countries and proposes a little opinion to the construction of SPV in our country at last.