China Spv Construction Of Legal Systems

Based on the risk remoteness mechanism,such as "assets transfer"and "bankruptcy remoteness", securitization is devised to have an innovative financial structure which makes it quite distinct from the traditional financial products and enables it to become the most dynamic financial tool in the world today. Originating in America in the 1970s, securitization has constantly developed and perfected itself over the past 30 years. Nowadays, it has found its way into countries in the Europe, Asia and even Latin America, integrated itself into the local systems of economy, law and society and injected a great deal of energy into the financial markets of these countries. As a whole, it is rapidly changing the global configuration of both the financial resources and the financial risks. Situated at the core position of the transaction, a Special Purpose Vehicle (SPV) is playing an important role in the whole process of securitization. It is the truth that a securitization transaction could not be successful without a scientifically devised and smoothly functioning SPV. China's authority has become keenly interested in the potential of securitization as a tool to help achieve their objectives of capital relief, risk transfer and balance sheet optimization for companies and commercial banks. However, China did not begin her securitization transaction until the early 1990s. Due to the difficulty, such as legal obstacles, China failed to achieve an onshore SPV. The main task of this paper is to explore the way to establish the legal institution of SPV in China, by studying China's specific legal situations and using the international experience of legislation and practices as a reference. This study is completed by means of analysis, comparison and induction. Chapter I mainly analyzes the importance and function of SPV. This paper begins from introducing the principles of securitization by giving prominence to its characteristic distinct from the other traditional financial tools. Then it points out that the core position of the SPV in a securitization transaction, that is, it is not only a firewall, but also a bridge between the originator and investors, for it not only isolates the risks but also links two sides. Lastly, in order to give a knowledge background for further analysis, it introduces three forms of SPV and their advantages and disadvantages by comparison. Chapter II discusses the necessity of China's establishment of the legal institution of SPV. I think there are some obstacles to developing securitization in China. In order to achieve the long-term development of securitization, firstly we should remove all the legal obstacles to pave the way for its operation. Studying the legislation of countries and areas of the civil law system, we can find that legal institution of SPV is one of the important parts. Chapter III and IV separately probe into the establishment of the legal institutions of Special Purpose Trust (SPT) mechanism and Special Purpose Corporation (SPC) mechanism. SPT and SPC are the two widely used forms of SPV in the world. According to the modern financial supervision theory, this paper tries to analyze from two sides, namely, the outside supervision institution including establishment and business application, issuance and exchanges of the securities, information disclosure, taxation management and daily supervision and the inside control institution including the organization structure and control of business operation. Before discussing the legal institution establishment question, Chapter III explains how trust theory works in the SPT mechanism and points out its advantaged predominance of bankruptcy remoteness. I suggest introducing the double proprietorship in China's Trust Law to clarify the trust relationships. Chapter IV studies the character of SPC and its risk remoteness mechanism, including true sale, bankruptcy remoteness and two-tier structure.