The Legal System Of Asset Securitization Special Purpose Companies

By exploring the definition ,origins and characteristics of asset securitization, a structured finance tool, and introducing the normal procedures, the article analyzes the legal problems of special purpose company ,and proposes the related construction to improve legislation.The most important character of asset securitization is the special purpose company(SPC). Special purpose company is transferee of assets and also the issuer of asset-backed securities(ABS).SPC, as the core of asset securitization, can divide investors from other risks effectively. As an instrument of asset securitization, the core value of SPC is risk-remote. SPC is a bankruptcy-remote entity. SPC not only should be kept away from the bankruptcy risk of itself, but also the bankruptcy risk of parent companies.According to the international practice and experience, there are three main mode of special purpose vehicle(SPV):Company, Trust and Partnership. Special purpose company can issue different grades or other sources of payment of ABS. The company mode of SPV can also provide a variety of choices for originators. But it is difficult to avoid double tax for SPC. Adopt special purpose trust, the trust property is not only independent from the client's property, but also from the trustee's. So SPT can realize risk-remote effectively and avoid double tax. Special purpose limited partnership mostly appeared in asset securitization in the United States, but rarely adopted this form in other countries and regions.Asset securitization first appeared in the United States in the 1970s and spread over the world in the 1990s. Although United States and Europe have already formed a asset securitization market with considerable scale and asset securitization is playing a more and more important role in the international finance market, asset securitization has still not officially implemented in China. It is one of the major reasons that SPC encounters series of legal obstacles in Chinese current situation. So the author proposes the legal barriers of setting SPV in the form of company in our country and gives the proposal of improving legislation on SPC.