The Application Of Floating Charges In BOT Project

As BOT project requires large investment and long construction period, its financing guarantee method is of great importance. Floating charge preferably fits the BOT projects. The assets in BOT, an investment project based on chartered right and relevant usufruct, are unspecified and floating, since they form gradually after charter obtained. The assets and rights are also demanded by the creditor as the subject matter in mortgage and pledge of rights, while the expected return is to repay the debt. Therefore, to both parties, the superiority of applying Floating charge to BOT is significant. Floating charge is in accordance with the trend of modern real right for security. Besides, Floating charge system has been established for the first time in China by its Real Right Law.This article consists of more than 34,000 words. It addresses the theoretical and practical problems in applying Floating charge to BOT, as an illustration of the conflicts among China's current statute laws and between statute laws and practices. The suggestions in this article are proposed to help improve China's future Floating charge system so as to ensure the effectiveness and security of BOT. The main body of this article consists of four chapters, in addition to the introduction and epilogue.The first chapter introduces the basic concept, characteristics, operating process of BOT, and emphasizes the significance of financing guarantee system in BOT. In this chapter, the sources of assets in BOT are listed in detail. All possible financing guarantee methods are considered and discussed. After weighing the pros and cons of these methods, Floating charge is selected as the most suitable one.The second chapter has a review of Floating charge, including its concept, characteristics, value and balance of interests involved. Investigation is made into the legislation and practice of Floating charge in China and civil law countries. Meanwhile, the potential risks brought by Floating charge and possible precautions are discussed as well.The third chapter reveals the relationship between BOT financing guarantee and Floating charge and proves the applicability of Floating charge to BOT as a preferred financing guarantee method. Consideration has been given to such specific applications as registration, public summons, assets supervision, crystallization and take-over in this chapter.The fourth chapter analyzes the defects of China's current Floating charge system applied to BOT by looking into present situations of asset ownership, administrative examination and approval system, and Floating charge on real estate. Certain legislative proposals are made after the analysis.