Legal Issues Of Financial Asset Management Companies

The establishment and operation of financial asset management companies (hereinafter referred to as the AMCs) which is drawn from international practice is an important measure taken in the reformation of our country's financial system. It aims to dispose of the non-performing loan from state-owned commercial banks, also to wipe out domestic financial risk and resist international financial disturbance. The AMCs of out country which are shouldered by special tasks cannot run smoothly without legal support. While in this paper, five aspects of problems involved in the AMCs are discussed from a legal point of view.Part one mainly discusses the legal character of AMC. Some people think it as "organization of non-legal person", some think it as "official organ as legal person", some think it as "institution as legal person", others think it as "non-company as legal person", and so forth. The reasons for different opinions are: AMC is newly established in our country without a certain legal basis and there doesn't exist uniform practice from abroad. In the author's opinion, both the current situation and development of AMC taken into account, it shall be defined as "company as legal person" under "company law". It can be supported by the following causes: definitions of others unreasonable and the conformity of AMC with the basic characters of company and advantages of reduction of legislative cost as well as promotion of AMC's development, etc.Part two focuses on AMC's governance. Some great deficiency exists in the current AMC's governance. First , lack of board of directors doesn't conform to international practice. Second, the supervisory board of AMC has too many powers, such as supervision of all the activities and performance of the operational policies. Third, the way to produce the high rank members is unreasonable. Therefore, the author points out: as the governance of legal personis the kernel of modern enterprises, it is necessary to establish scientific governance of legal person in AMC, which lessons can be drawn from other countries like Korea and Malaysia.Part three deals with "the transition of credit's rights to shareholder's rights" in AMC's operation which faces severe legal predicament. First , legal blanks or barriers together with the low grade of legal effect of "Regulation on Financial Asset Management Company" brings AMC into a dilemma. Second, barriers of current laws become a great hinder to the operation of AMC, such as certain terms of "Company Law", "Security Law" , "Guaranty Law", "Contact Law", etc. Thus, a proper modification shall be conducted according to current laws involved to create a good legal environment for "the transition of credit's rights to shareholder's rights " of AMC. And also, the government is not legally permitted to act as guarantor of enterprises under current circumstances. Moreover, many legal problems exist in the implementation of "credit's rights transferred to shareholder's rights". They consist of the rights of selecting the target enterprises, lack of concrete standard of enterprises to be applied which can easily lead to corruption, the way to own the stocks of destination enterprises and carrying out the principles of "equality, voluntariness, impartiality" to resist moral risk.Part four is about ways of withdrawal of AMC which includes asset selling, buying back of shareholder's rights, transfer of shareholders' rights and liquidation after bankruptcy. However, two main ways of buying back shareholder rights and transfer of shareholder's rights will be emphasized and their legal restraints will be discussed in detail in this paper. In author's opinion, according to current legal restraints, it's necessary to reduce the restraints of buying back shareholder's rights and confer certain rights of management and operation to AMC and also to properly modify correspondent laws and regulations to permit state-owned shares and shares owned by legal person to circulate in security market.Moreover, foreign capital's participation in the transition of c...