Analysis Of Legal Issues Of Credit Asset Securitization Special Purpose Entities

Credit asset securitization was regarded as one of the most important financial products since 1920s and 1930s by the American scholars. Administration of Pilot Projects for Securitization of Credit Assets Procedures was promulgated jointly by the People's Bank of China and China's Bank Regulatory Commission on April 20th, 2005, which marked the turn from the theoretical research to operation in reality of China's credit asset securitization. However, Credit Asset Securitization is just born in China. The exact definition about Credit Asset Securitization in theorists is not unified with the realistic practice. Thus, this article tries to define it firstly: Credit Asset Securitization, proposed by the author of the thesis, refers to a process in which the credit assets lack of liquid while producing anticipated cash flow can be transformed into securities which can be sold and circulated on the financial market, by means of certain structure arrangement according to certain common quality and recombination of the risks and profits.The core of the credit asset securitization is the design of the risk-remote mechanism. SPV, the essential agency of credit asset securitization, fully plays the role of bankruptcy-remote and functions critically in the process of credit asset securitization. The thesis begins with a brief description of the basic theory and operation of credit asset securitization, proceeds with a careful introduction to SPV in which experiences in foreign countries are used for reference to analyze the legal obstacle of the practice of SPV in China, and concludes with the necessity of establishment of laws to regulate the operation of SPV with the purpose of finding a way out for the general application of credit asset securitization in China.The body of the thesis consists of four chapters. Chapter One analyzes the broad sense and the narrow sense of asset securitization by introducing the concept of credit asset securitization so as to make a clear understanding of credit asset and credit asset securitization. Apart from that, the basic theory of credit asset securitization which includes the basic principles, identities, participating subjects and general process is narrated in the chapter, in which SPV is given prominence to.Chapter Two makes an introduction to the basic theory of SPV which includes its concept, status and its legal features. Derived from the legal features of SPV, SPV must guarantee bankruptcy-remote. Furthermore, how to guarantee bankruptcy-remote is elaborated, that is how to avoid operation risks in abnormal management and bankruptcy risks. In the last section of this chapter, the legal relationship between SPV and other participating subjects in credit asset securitization is made a detailed introduction, among which, two legal relationships are paid special attention to.Chapter Three expounds the structural theory of SPV and the two frequently-adopted forms of SPV—SPT and SPC.Chapter Four makes a discussion about the legal obstacles SPV has encountered in China. From the discussion, the author comes to an conclusion: To promote the development of Credit asset securitization, it is necessary to establish a law to regulate SPV because there are still a lot of gaps between the new modified laws—Company Law, Securities Law and Bankruptcy Law–and SPV.