CHINA Law and Practice Contributed by: Borong Liu, Xiaoli Liu, Jingyi Lu and Zhijie Zhang, Zhong Lun Law Firm
tration and Public Notice System of the PBOC’s Credit Reference Centre. However, whether to conduct such registration immediately after the transfer or after the occurrence of an agreed trig - ger event depends on the credit condition of the originator. 3.4 Principal Covenants In order to ensure a smooth transaction, the orig - inator usually makes the following covenants in the transaction documents: • the originator will continue to fulfil its obliga - tions under the contracts concerning the underlying assets in a comprehensive, com - plete and timely manner, and not relinquish or delay the exercise of its rights; • after the transfer of the underlying assets or the establishment of the trust, the underlying assets will not be transferred to or disposed of for the benefit of any third party, nor will any security interests be established regard - ing the underlying assets; • any defect in the assets or the transaction that might hinder the transfer of the under - lying assets shall be remedied with due diligence to facilitate the smooth and lawful execution of the transaction; • the contract concerning the underlying assets shall not be arbitrarily modified, nor shall any obligations or liabilities of the obligor on the underlying assets be waived, so that material adverse effects on the underlying assets are avoided; • the originator will provide protection for the underlying assets and related interests to prevent such rights and interests from being infringed upon by third parties; • the originator will not lose solvency in the foreseeable future due to the establishment of the trust; and
• the originator will not engage in any act that might result in the corresponding debtor exercising a right of set-off or right of defence regarding the underlying assets. The originator will be deemed to be in default of the contract and liable for indemnities and other liabilities upon breach of any covenant. 3.5 Principal Servicing Provisions The contents and conditions of the services provided by the servicer are stipulated in the servicing agreement and may vary according to the type of underlying asset. However, the main services can be summarised as the following: • collecting the receivables on the underlying assets and transferring collections thereof to the SPV; • managing the underlying assets and monitor - ing their conditions; • risk management, recovery and disposal of the underlying assets; • recording the status of the collection of funds in an accurate and timely manner; • safekeeping of the data and records concern - ing the underlying assets; • assisting the trustee/plan manager in replen - ishing eligible underlying assets when a revolving pool is involved; and • reporting the conditions of the asset pool on a regular basis. A servicer generally would not provide any guar - antee or assurance on the return of the underly - ing assets. If the servicer fails to perform its obli - gations under the servicing agreement, or if any of its representations, warranties and commit - ments under the servicing agreement is materi - ally false, inaccurate or misleading, the servicer is deemed to be in default and becomes liable for the breach of contract.
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