The Legal Issues Of The Trust Beneficiary Right Pledge

Trust as a special approach to transfer and manage wealth, is getting popular due to its relative flexibility in China. In 2008, it is estimated as the second largest financial industry after banking. By the end of 2015, the capital scale of trust AUM has reach 163 trillion RMB. However, it is undeniable that trust industry is facing more bottlenecks, such as poor liquidity. Although the beneficial right of the trust in trust law refers to the beneficiary right under trust relationship, the object of this study is the beneficial right of the trust which is under the management of trust company. One of the reasons is that some of the beneficial right under trust relationship has good liquidity, such as fund shares. In spite that fund shares are essentially the beneficial right of the trust, fund shares have good liquidity. Because the fund shares are regulated in detail in the securities investment fund law, it is not necessary to study in this paper. Another reason is that if the right of financial products established by trust relationship is the beneficial right of the trust is still controversy. Given the limited capacity, the author is unable to discuss one by one. So this paper focus on the beneficial right of the trust which is under the management of trust company.The methods to break through the bottlenecks and to maintain a healthy and lasting development in this filed has become a focus for insiders. Also, the current situation makes people who works on the development of relevant theories to ponder over how to make full use of the features of trust to make breakthroughs in this aspect. Against this backdrop, trust beneficiary right pledge has been taken as one of the most effective solution to this issue. Therefore, the author of this paper concentrates on the study of trust beneficiary right pledge and tries to reveal the establishment of this system.This dissertation consists of four parts.Part One: This is a brief introduction to current the trust beneficiary right pledge in China. First of all, the author gives readers the idea that the innovation of trust was propelled by the booming development and hardship of trust industry in China and therefore, trust beneficiary right pledge was created, as an effective method, to eliminate bottlenecks in this area. Furthermore, trust beneficiary right pledge, as an innovation of trust, has been controversial due to legitimacy, unclear publicity, discouraged by legal barriers if analyzed from both legal and practical level.About part two, three, four, the author learns from Japanese relevant laws as well as theory and practice. Trust springs from Anglo-American law system, the theory of property right is different from China. For this reason, the value of referencing from Anglo-American law system is small. But, Japan is a typical countries of continental law system who introduced trust. When formulated the law of trust, China was learning from Japan. In Japan, trust beneficiary right pledge has undergone a process from scratch. So the theory and practice of beneficiary right pledge trust in Japan is worth learning.Part Two: the tenet of this part is the theoretical analysis of the feasibility of trust beneficiary right pledge. First of all, the author outlines the basic theories of trust beneficiary right from two perspectives:Its origins and its definition. Then, on the basis of the summary of where continental law system stands on the nature of the trust beneficial right which takes Japan as a representative, along with the lessons learnt from the consequences of the revision of trust law in Japan since 2006,rules and theoretical practice in Japan, the author comes to the conclusion that the beneficial right of the trust is obligatory right. Finally, based on property right, the author comes to the conclusion that the beneficial right of the trust can be pledged from the aspects of property, transferable and suitable for pledge.Part Three: in this part, the publication and scope of validity of the trust beneficial right pledge become the author’s focus. Regarding the publicity of the trust beneficial right pledge, after an analysis of the stipulations of the trust beneficial right pledge in Japan, the author posits that the trust beneficial right pledge in China can take parts’ agreement as the requirement of validity, take registration of pledge as confrontation requirement.The author expounds if the effect of pledge governs the non-property right of trust beneficial right in relation to scope of validity of the trust beneficial right pledge. Further discussions about the content of the pledge, the contrast with co-benefits rights, the function of non-property right lead to the proposition that scope of validity of the trust beneficial right pledge should not govern the non-property right of trust beneficial right.Part Four: This is a discussion of the structure of the trust beneficial right pledge system in China by improving the legislative and supporting system.Firstly, the author suggests that efforts to improve legislation need to be exerted to ensure the legitimacy of the trust beneficial right pledge from legal dimension. Due to the various levels of difficulties of legislation, in the first step, the author’s counsel is to amend the law of trust, enabling the legitimacy of the trust beneficial right pledge. In the second step, amendment of the legislative model of pledged rights in property law and guarantee law in a proper time is necessary.Secondly, the author believes that enhancement of relevant systems is needed by virtue of carrying out the registration system of trust benefit right on an exercisable level, in order to secure the execution of the registration of trust benefit right pledge. In this regard, Japan trust law(2006) and trust registration trial method can be referred in terms of the relevant regulations about the registration of the beneficial right so that the registration system of trust benefit right can be built by the establishment of China Trust Registration Company. In view of that he registration of trust benefit right pledge is essentially the registration of the encumbrances of trust benefit right, the author argues that based on the registration of the beneficial right, carry out the registration of trust benefit right pledge.