Asset Securitization Special Purpose Vehicle In Legal Research

Asset Backed Securitization (ABS) is the most important innovation infinancefield in the latest 30 years. Since it appeared in American capital marketin 1960's,ABS develops prosperously in American capital market and in otherimportant countries' capital market relying on its advantages in asset creditfinance, structure finance and finance beyond the form.Based on the fundamentaltheories on asset securitization, this paper first introduces a concept of specialpurpose vehicle (SPV) and centering on the core position hold bythe concept inthe whole process of asset securitization, the paper studies its nature inlaw, effectiveness and organization form, fulfills an effective insulation frominvestment and bankruptcy risk, guarantees a standardized operation of assetsecuritization, and reduces invest and market risks by launching an analysis onthe particular law structure, basic principles and operation mechanism of specialpurpose vehicle. Then, against current law environments in China, the paperanalyzes in detail the pros and cons of establishing two special purpose vehiclesof firm and trust, argues the need for law on asset securitization andestablishessuitable special purpose vehicles in an attempt to accelerate China's assetsecuritization process and fulfill the goal of improving relevant law system andadvancing operation efficiency of capital market.The paper consists of following three parts: foreword, mainbody andconclusion.Foreword mainly deals with the reason for drafting this paper and pointsout that as one of the most sophisticated innovations of modern financial market,asset securitization converts asset lacing fluidity into a fluid one so that newinvestment opportunities are created and operation efficiency of financial marketis improved. Although China has started its attempt on asset securitization, ittakes the form of issuing asset-supported securities in foreign capital markets.The main reason is the absence and imperfection of relevant laws, the mostimportant of which should be the absence of special purpose vehicle. The lawcircle needs to launch necessary research in order to find solutions.Mainbody of the paper falls into four chapters which covers studies onbasic theories of asset securitization, law structure of special purpose vehicle, risk insulation mechanism and choice of China's special purpose vehicle, etc.Beginning with basic theories of asset securitization, the first chapteranalyses in detail the concept, characteristics and development course of assetsecuritization as well as therealistic implications of asset securitization on China'seconomic development. The conclusion is asset securitization is advantageous toboosting the development of consumption, credit market, reducing non-performing loans of banks, and providing new investment channels for investors.Centering on the core position held by special purpose vehicle in the wholecourse of asset securitization and carrying out a systemic law analysis on specialpurpose vehicle, the second part describes the concept, law nature, position andeffect of special purpose vehicle, analyses different legitimate relations betweenspecial purpose vehicle and initiators, investors and other service institutions.The third chapter, through an analysis on the business scope and preventionagainst bankruptcy risks of special purpose vehicle, describes the mechanisms ofbankruptcy remotness relevant to special purpose vehicle. In addition, the chapteralso studies measures to strengthen the risk-preventing ability of special purposevehicle in an attempt to realize an effective insulation between special purposevehicle and risks, improve the safety and efficiency of asset operation andguarantee returns to each participators of asset securitization.The fourth chapter is the thrust of the paper. Stipulation on the law bodies isthe top issue when establishing special purpose vehicle. Establishment of anybody needs to comply with certain requirements from law. Through an analysison the favorable conditions and law obstacles of setting up trust and companyforms of special purpose vehicle and an integration of China's current law systemand actual situations, this chapter puts forward a suggestion to enact China's assetsecuritization law.Summarizing the whole paper, the conclude ingpart recommends relevantlaw suggestions in a view to provide useful reference for the implementation andrelevant legislation of China's asset securitization process.