The Effectiveness Of “Bottom Profit Clause” In Moeny Trust

According to the definition of Trust stipulated in <The Law of Trust>, the trustee of money trust discussed in this thesis is not confined to the trust company. It includes the natural person and other legal person who has full capacity for civil conduct. The “Bottom Profit Clause” discussed in this thesis excludes the situation that the fixed return clause agreed between the parties and the use of money is defined by the trustee. Actually its legal nature is debtor-creditor relationship.Any natural person and legal person who have the full capacity for civil conduct is eligible to be trustee for civil money trust. The “Bottom Profit Clause ”cannot be deemed as invalid just because the trustee does not have special qualifications. The “Bottom Profit” voluntarily promised by the trustee in civil trust does not necessarily make obvious unfairness. The regulation that the trustee assumes limited liability for the beneficiary is arbitrary regulation instead of mandatory one. It shall enable trust parties to stipulate special agreement. Because what the trustee of civil trust accepts is the accidentally happened entrust from particular object, it shall not extend its effect to the degree of damaging interest of the public. Even the civil money trust recognizes effectiveness of the “Bottom Profit Clause”, it does not make the doer constitute illegal fund-raising offense because it lacks the condition of absorbing fund from the public.The business money trust managed by the trust company and by the securities investment management company is recognized by the law in china. But apart from that, other financial institutes are also engaged in business money trust. They shall also be regulated by < The Law of Trust>. The management of business trust shall belong to the franchises, so the legitimacy of those non-financial institutes and of natural person that do business money trust shall be denied. Regarding the effectiveness of “Bottom Profit Clause ”in business money trust, it will be illustrated and analyzed from the perspective of legislation, judiciary, actual situation and extraterritorial legislation. In terms of legislation, supervision departments have different definition about effectiveness of “Bottom Profit Clause”. In terms of judiciary, the court adjudges “Bottom Profit Clause”invalid, but it guarantees principal of beneficiary is free from damage from perspective of legal consequence. In actual practice of trust, take the trust company- the main institute engaged in money trust for an instance. Though department regulations prohibit the trustee making “Bottom Profit” promise, actually trust companies have principal and profit requirements for most in trust products. In terms of extraterritorial legislation, Japan and Taiwan of china at the early stage allowed trustee to make “Bottom Profit” promise.It promotes development of trust, but meanwhile also leads to some trust companies gradually getting into debt crisis or the systematic financial crisis.As far as our country is concerned, because the vast majority of financial institutes are state-owned or state holding enterprises, the business trustee shall be prohibited from reaching free agreement on “Bottom Profit Clause” with the client to avoid systematic financial risk. On the other hand, under the premise of risk control, the establishment of Preservation Trust is still necessary.China’s current legislation on the provisions of fiduciary duty overly complies with the principle without specific standards and operability, which easily results in moral hazard of the trustee. It is difficult for the trust to win the trust of the client under the circumstance of the incomplete fiduciary duty, because of which, allowing preservation trust has its practical rationality. Currently, the regulation that supervisors forbid the trustee to promise “Bottom Profit” renders “rigid payment” only a kind of implicit guarantee. The ambiguity of the implicit guarantee enables individual risk to be intertwined with systematic risk. Therefore, under the premise of effective risk control, legal recognition of the legitimacy of the preservation trust is beneficial to the separation of the individual project risk and systematic risk. Finally, the establishment of the preservation trust will help to reduce transaction costs of the parties to a trust, including contracting cost, supervising cost, etc. Thus, it is necessary to learn from the experience of Japan and Taiwan of china. Based on unified regulatory standards, the business money trustee shall be allowed to promise “Bottom Profit” according to law.In the initial establishment of preservation trust, it can be confined to the business money trust with unspecified using methods, and the use of money is determined by the trustee. The preservation trust can be regulated in the scope of the trust, the trust period, the highest guaranteed rate of return and the beginning amount. At the same time, to ensure that the trustee’s promise of “Bottom Profit” can be achieved and that the systematic financial risk can be reduced to the minimum, relevant risk sharing mechanism shall be created, including the introduction of guarantee system, the purchase of trust insurances, the provision of risk compensation, subscription for trust security funds, etc.