Securitisation 2025

CHINA Law and Practice Contributed by: Borong Liu, Xiaoli Liu, Jingyi Lu and Zhijie Zhang, Zhong Lun Law Firm

of the ABS. It will preside or participate in the bookbuilding or bidding procedure for issuance of the securities. Before that, it will do market investigations and road shows to form an accu - rate opinion regarding the margin for price. The lead underwriter normally acts as the transaction arranger or financial adviser, taking the lead in the design of the transaction structure, the co- ordination of the progress of the project partici - pants, filing with the regulatory authorities and other matters. The underwriters are generally domestic financial institutions, mainly banks and securities com - panies, as well as foreign banks registered in China. Regarding CIBM business asset securiti - sation, in addition to banks and securities firms, trust companies can also act as underwriters. Necessity of the Underwriter In credit asset securitisation and CIBM business asset securitisation, an underwriter is required. The regulations on credit asset securitisation even require the issuer to organise an under - writing syndicate. In contrast, an underwriter or placement agent is not a requirement for an exchange market securitisation, as the issuers are often capable of placing the securities by themselves. 2.5 Servicers A servicer is often engaged by the issuer to provide services in relation to the underlying assets. Servicers are usually the originators of the underlying assets, or their affiliates. The issuer may also engage more servicers besides the originator; these are often technical servic - ers or professional institutions with expertise in the underlying assets. The general responsibili - ties of the servicers include collecting the cash flow from the underlying assets and transferring it to the SPV, managing the underlying assets

and keeping related records, safeguarding the legal documents and records, disposing of the defaulted assets and providing regular service reports to the SPV manager or trustee. In respect of credit asset securitisation, the ser - vicer shall be a financial institution established in China and qualified to extend loans. For other types of securitisations, there is no specific per - mission requirement for servicers, except for authorisation conferred in the servicing agree - ment. 2.6 Investors Investors in ABS generally do not actively par - ticipate in the management of the SPV, but pas - sively receive payments on the securities. The investors can only attend the security holders’ meeting and vote in situations where the inves - tors’ rights might be affected. The main obliga - tions and responsibilities of the investors include paying the subscription price in accordance with the terms of the subscription agreement; com - plying with the trading limits set in the relevant laws, regulations, and transaction documents; complying with the provisions on the exercise of rights; and maintaining confidentiality regard - ing trade secrets. See 4.13 Entities Investing in Securitisation for discussion of the kinds of enti - ties that typically invest in securitisations. 2.7 Bond/Note Trustees Article 92 of the Securities Law requires that a bond trustee shall be appointed for a public offering of corporate bonds. Since securitisation in China has not adopted the corporate form of special purpose company (SPC), there’s no requirement of a bond/note trustee: as the SPV for a securitisation is often a trust or agency rela - tionship, and the trustee or plan manager stands in a fiduciary relationship with the investors, a separate bond/note trustee is not necessary.

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