CHINA Law and Practice Contributed by: Borong Liu, Xiaoli Liu, Jingyi Lu and Zhijie Zhang, Zhong Lun Law Firm
trust property delivery date). The contents of asset warranties may differ depending on the different types of underlying assets, but custom - arily include the following: • the underlying assets meet the eligibility criteria; • all relevant information and information disclosure of the underlying assets is true, accurate and complete; • the originator has sole and legally valid own - ership of the underlying assets; • the underlying assets are not encumbered by pledges or other kinds of burdens, nor restric - tions on transfer; • the conditions precedent for the obligor’s obligations to perform on contracts concern - ing the underlying assets have been satisfied; • the provisions of the contracts concerning the underlying assets are legally valid and binding on the relevant obligors; and • the originator has not given a third party any option affecting the recoverability of the underlying assets. If the underlying assets do not satisfy the require - ments of the asset warranties at the time of entering the asset pool or transfer, the underlying assets will be recognised as ineligible assets and must be redeemed by the transferor or originator according to the transaction documents. 3.3 Principal Perfection Provisions Currently, the prevailing right perfection meas - ures include two kinds: (i) sending right per - fection notice to the debtor and the guarantor, and (ii) conducting the transfer registration for the related mortgage or pledge. To facilitate the collection of the assets and to reduce the trans - action costs, such measures are not normally taken at the delivery of the underlying assets, but only required upon the occurrence of right
perfection events provided in the transaction documents. Right perfection events usually include but are not limited to situations where: • the servicer is terminated due to the occur - rence of servicer termination events; • the servicer loses a certain credit rating; and/ or • the originator loses a certain credit rating or solvency. After the occurrence of a right perfection event, the originator will send a right perfection notice to the debtor and the guarantor (referred to col - lectively as the obligor): • informing the obligor of the transfer of the underlying assets or the establishment of the trust; and • instructing the corresponding obligor to repay directly to the ABSP account or the trust account from the date of receipt of the right perfection notice. If the underlying assets are secured by a mort - gage or pledge that requires a registration, the originator must conduct the transfer registration promptly upon the occurrence of a right perfec - tion event, to ensure that the mortgage or pledge held by the plan manager or the trustee will be valid against any bona fide third party. In addition, based on new changes brought by the Civil Code and the Interpretation by the Supreme People’s Court on the Application of the Security System of the Civil Code (the “Interpretation of the Security System”) (see 6.3 Transfer of Financial Assets ), more securitisa - tion transactions will consider registering the transfer of accounts receivable with the Regis -
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