A Research On Appropriateness Of Right To Income Over Assets As Trust Property

The trust of right to income over assets is a kind of trust which is created by the settlor(the owner of the particular asset)holding the right to income over specific asset as trust property.The emergence of the trust of right to income over assets was linked to the continuing regulation and control against the real estate industry.At the very first,real estate enterprises and trust companies launched the financing mode which directly issued loans using assembled funds.However,as China Banking Regulatory Commission(CBRC)was continuing to promulgate increasingly severe policies regulating and controlling the real estate industry,such as Circular on Enhancing Supervision against Real Estate Trust Business of Trust Companies,and Circular on Risk Warning for Real Estate Trust Business of Trust Companies,real estate enterprises and trust companies have designed more complex financing modes one after another,such as purchasing rights to income over assets with assembled trust funds,and creating trusts of right to income over assets to assemble funds,in order to change the nature of their businesses,evade regulation and achieve financing.Thus,based on the above introduction,the legal and compliance status of this kind of trust is highly controversial,and the biggest controversy is whether rights to income over assets can be held in trust as trust property,or whether rights to income over assets satisfy the certainty standard of trust property.The case Anxin Co.v Chungao Co.is right on time,and whether it can go through the judicial review attracted the universal concern of the trust industry and legal academics.So,the case is known as “the first case” of the dispute concerning trust of right to income over assets.In this case,the court,on the one hand,needed to respond to the above theoretical controversy,on the other hand,had to analyze the complicated transaction structure,which,obviously,was a tough challenge to the court.However,in the written judgement,the court had not made a judicial confirmation for the right to income over assets as the qualified trust property.Also,it had not recognized the validity of trust of right to income over assets in a general sense.Instead,the court directly determined that the trust contract in this case is valid,abiding by the principle of No Trial without Complaint.Therefore,the judgement of this case,to some extent,has a reference value to other cases concerning trust of right to income over assets,but whether it can be acknowledged by other courts is still a question.However,it is hard to deny that the case Anxin Co.v Chungao Co.provides us with an excellent source material of case.And the evasion of the court doesn't mean that we don't need to respond to the appropriateness of the right to income over assets as trust property.Thus,this paper takes this case and the enormous controversy it presents as a research point,intending to carry out a thorough study about the standards of being a definite trust property,and seeking the theoretical support from the Common Law and Continental Law,in order to put forward an independent opinion of this question and draw a relatively comprehensive conclusion.The structure of this paper is as follows:In the first chapter,based on the thorough study of the civil written judgement with regard to this case,this part concludes the facts and judgement result of this case,including the first and second instance,and leads to the core controversy that trust of right to income over assets is facing.The second chapter mainly defines the nature of the right to income over assets,taking it as the starting point of research on the trust property of this kind of trust.But,before that,this part makes a basic introduction of the meaning,model and historical development of this type of trust.Guided by this logic line,this chapter consists of 2 sections:Section 1 makes a basic introduction of trust of right to income over assets.In a broad sense,these trust products can be divided into 2 models.One is creating a trust firstly,to assemble money of the public,and then using these funds to purchasetheright to income over assets.The investment income can be realized by the commitment or repurchase of the financier.The other is to set up a trust of right to income over assets,holding right to income over assets as trust property,and then raising fund from the public.The biggest difference between them is that,in the first model,the legal relationship between trust companies and financiers is contractual relationship,but in the second model,is trust relationship.However,whatever which model it is,these transaction structures are created and developed motivated by evading the regulation policies of real estate industry.So,its legal and compliance status is a very controversial topic.Section 2 analyzes the legal nature of right to income over assets in detail.At present,the legal academics have 4 representative opinions towards it,which,respectively,are one kind of property rights,income function of ownership,a new kind of usufruct right,and future creditor's right of contract.This paper holds that right to income over assets is a kind of future creditor's right of contract.Right to income over assets is an independent right in which the income function of ownership has been materialized.Besides,although the owner of the underlying assets transferred the income of selling the underlying assets through trust,the owner is still the party of the sales contracts,and the holder of the right to income over assets cannot sign contracts or make other similar legal actions in his own name.The third chapter is the core of this paper.This part analyzes and demonstrates the appropriateness of the right to income over assets as trust property thoroughly,using various research techniques,such as comparative analysis,case study,normative analysis and literature review.This chapter consists of 4 sections.Section 1 describes the differences between the Common Law and Continental Law when defining the certainty of the trust property,in order to pave the way for the follow-up discussion.Section 2 introduces different opinions of different scholars towards this “certainty” question,on the basis of defining the nature of the right to income over assets,and in the perspective of the case Anxin Co.v Chungao Co.,in order to present the enormous controversy of this kind of trust.Section 3 focuses on analyzing the opinions which hold that the right to income over assets cannot be a qualified trust property.The opponent views combine the time point of certainty of the right to income over assets and transfer rules of future creditor's rights of contracts to support their opinion,but this part will refute their opinion on the ground of legislation practice of china and other countries.Section 4 is a summary of this chapter.In view of the fact that China's trust law does not clearly define transferring of trust property as one of the elements of creation of trust,and considering the right to income over assets,as a kind of contingent future interest,is definite itself,and the debtors and debt amounts can be ascertainable,so,the right to income over assets,as trust property,is definite.Besides,referencing the relevant regulations of Administrative Provisions on the Asset Securitization Business of Securities Companies and Subsidiaries of Fund Management Companies promulgated by the China Securities Regulatory Commission(CSRC)on November 11 th,2014,CSRC determines the certainty of assets mainly through the independent,predictable cash flow and proportion of “to be developed/under construction”,which,to a considerable extent,is helpful to reduce doubts against the certainty of the right to income over assets as trust property.The fourth chapter,from the perspective of registration and publicity,to set forth the beneficial impacts,the developments of China's trust registration system putting on the trust of right to income over assets.Because it can realize the registration of products of this type of trust and their beneficial interests,the necessity of the transaction parties to sign the “yin and yang contract” will be significantly reduced,which can greatly simplify the transaction structure of this type of trust,thus reducing the difficulty of judicial identification;furthermore,the existence of registration could prove the certainty and independence of the right to income over assets,so,the risks of not being acknowledged by courts,which the transaction parties is facing,will be greatly reduced.The fifth chapter is the conclusion of this paper,also demonstrating the attitude of this paper concerning the appropriateness of the right to income over assets as trust property.This paper holds that in view of the fact that China's trust law does not clearly define transferring of trust property as one of the elements of creation of a trust,and considering the underlying assets are existent and specific,the right to income over assets,as a kind of future creditor's right of contracts,which is attached to the underlying assets justifiably,is definite itself,so,the right to income over assets,as trust property,is definite.Even if our country adopts the model of trustees' ownership,it is not appropriate to deny all of this type of trusts,in order to promote the development of commercial trusts,enhance the competitiveness of trust industry,and improve the multi-level financial market system.Also,the transferring rules of future creditor's right can be illustrated and reshaped,for example,Article 9.1.5 of PICC 2010.In addition,this paper has drawn out one of the shortcomings of our country in the process of transplanting trust law – the ownership of trust property is unknown,which is related to the controversy of trust of right to income over assets.It is necessary to clarify the ownership of the trust property,not only for the special regulation of trust of right to income over assets,but also for the system construction and healthy development of the trust industry.