Research On The Nature And Effectiveness Of Credit Enhancement Measures Provided By The Third Party In Asset Management Products

Credit enhancement measures are widely used in various areas of commercial transactions,such as financial management,asset securitization and bond issuance,etc.This article takes capital management products as the area of study.Various types of credit enhancement measures have emerged because statutory forms of security do not meet the diverse needs of credit enhancement in practice,such as the need to create protection for interests for which statutory security cannot be created,the need to help investors achieve capital preservation and income protection while avoiding financial regulatory requirements,or the desire to avoid the requirements of internal resolutions required for external guarantees when the credit enhancer is a company.The credit enhancement measures can be divided into internal credit enhancement and external credit enhancement,based on the distinction between the obligor providing the credit enhancement and whether it is the financier’s own assets or the expansion to third party asset protection.The nature and effectiveness of internal credit enhancement is clearer because the parties to the transaction are the obligors of credit enhancement.In this article,we take the provision of credit enhancement by third parties as the object of study,and discuss the credit enhancement measures set up on the transaction side and the product side of the trust structure with case studies,and clarify the relationship between the parties in different credit enhancement measures.Regarding the determination of the nature of credit enhancement measures provided by third parties,Article 91 of the Ninth Minute and Article 36 of the Interpretation of the Security System propose three directions: guarantee,debt accession and independent contract,but they still have limitations and are more principled.This article proposes that the nature of the identification path is to determine whether the credit enhancement measures have a clear correspondence with the main debt relationship,when the debt of the credit enhancement measures and the main debt have the same nature,that is,can fully correspond,the credit enhancement measures may constitute a guarantee or debt accession,and analyze the difficulties and necessity of the distinction between the two,and further summarize the points of distinction between the two in judicial practice and the shift of the presumption of doubt rule with cases;when the credit enhancement measures have no direct correspondence with the main payment When a measure does not directly correspond to a principal obligation to pay,it constitutes an independent contract and is a contract without a name because it is impossible to classify its nature.The two main scenarios are: firstly,where a third party guarantees the exit from the investment relationship in accordance with the expected return by assigning the trust income rights of the credit enhancement right holder,the credit enhancement commitment document has the nature of an assignment of rights.The second is where the third party directly guarantees the difference between the investor’s actual return and the expected return,and the investor is both a creditor and a credited obligor,with the right to recover the remaining trust property and the right to be paid the difference.The validity of a third-party credit enhancement document,whether as a guaranteed contract or a contract without a name,should be recognized in the absence of statutory invalidity,but this article discusses three factors that may affect the validity of a credit enhancement document.The first is that third party credit enhancement is widely used in asset management products and plays a role in protecting the expected returns of investors,and there is a possibility that it constitutes a rigid payment prohibited by regulation.If it constitutes a rigid payment,it may be found in judicial decisions to be in breach of regulations and related to financial safety,market order and other public order and good morals,and the court will deny the validity of the credit enhancement undertaking documents based on the provision that legal acts against public order and good morals are invalid.Secondly,the company’s external guarantee is subject to internal resolution procedures.Under the existing norms,the provisions of Article 16 of the Company Law are applicable when the external credit enhancement measures provided by a third party constitute a guarantee when the third party is the subject of the company,and the provisions are applicable when it constitutes a debt accession,but the provisions are not currently applicable to the credit enhancement measures as independent contracts.In practice,there are cases where company operators circumvent the requirements of the Company Law through credit enhancement measures,but bring about the actual effect of impairment of the company’s property,and there are views in the academic circle that credit enhancement measures should be applied by reference to the provisions of Article 16 of the Company Law.Thirdly,external guarantees of listed companies are subject to more stringent regulation,and Article 9 of the Interpretation of the Guarantee System takes whether the contractual counterparty reviews the public disclosure of information by the listed company as an independent element of whether the company needs to assume responsibility.Although the existing regulation does not directly require listed companies to provide external credit enhancement measures to require information disclosure,but from the listed companies’ active information disclosure and some administrative supervision cases,credit enhancement measures are required to fulfill the information disclosure obligations because they may constitute external guarantees or connected transactions,etc.Against the background of strict regulation,there is a tendency for listed companies to provide credit enhancement measures to be identified as external guarantees,therefore,the active fulfillment of information disclosure obligations by companies for external credit enhancement is conducive to their standardized operation and avoidance of regulatory penalties.Credit enhancement rights holders can avoid unnecessary losses by taking the initiative to verify whether the listed company has made information disclosure on the credit enhancement.