Securitisation 2025

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

4.10 SPEs or Other Entities The regulations relating to SPVs are different for each type of securitisation. Among them, the Administrative Measures for the Securitisation of Credit Assets stipulate that the SPV for credit asset securitisations shall be an SPT. The Rules for CIBM Business Asset Securitisation stipulate that the SPV shall be an SPT, an SPC or other SPV forms approved by NAFMII. In regard to exchange market securitisations, the Adminis - trative Provisions on Asset Securitisation by the CSRC stipulates that the SPV shall be an ABSP or other SPV approved by the CSRC. In the case that an SPT is adopted as the issu - ance vehicle, the establishment and operation of the trust shall be governed by the provisions of the Trust Law. A recent judicial trend tends to regard the relationship of an ABSP as a trust and shall apply the Trust Law as well. On the contrary, SPC and special purpose limited part - nership (SPLP), which are common forms of SPE in international securitisation practices, have not been adopted in China’s securitisation market, because the Company Law, the Bankruptcy Law and the Partnership Enterprise Law do not con - tain any specific rules on SPC or SPLP. Non-financial companies can choose to conduct business asset securitisation either in the CIBM or on the exchange market. The choices of mar - ket are mainly affected by the issuance costs and the efficiency of the approval/registration procedure. Many enterprises will apply shelf- registration both in the CIBM and the exchange market, to best satisfy their needs for financing efficiency and flexibility. At least so far, tax treat - ment or bankruptcy remoteness have not been major factors influencing the choice of SPV.

4.11 Activities Avoided by SPEs or Other Securitisation Entities SPVs are established for the purpose of securiti - sation; therefore, their activities are limited to the needs of carrying out securitisation business, which are generally agreed and stated in the transaction documents. At the same time, rel - evant laws or regulatory provisions stipulate the prohibited activities of the trustee or the man - ager. For example, in credit asset securitisation and CIBM business asset securitisation, trust companies shall avoid misappropriating trust property for any non-trust purpose, promising the trust property will suffer no loss or guaran - teeing a minimum return, creating security rights over trust property, or engaging in liability busi - ness except inter-bank borrowing. In exchange market securitisation, the plan manager shall not embezzle or encroach on the assets of the ABSP, or provide guaranty for a third party with the assets of the ABSP. 4.12 Participation of Government- Sponsored Entities State-invested or state-controlled enterprises (referred to collectively as state-owned enter - prises, or SOEs) constitute an important part of the market economy of China and therefore participate in all kinds of securitisation practices. However, SOEs in the Chinese market need to be differentiated from the government-sponsored entities (GSEs)– such as Ginnie, Mae, Freddie, Mac or Fannie, Mae – in the US market. SOEs in the Chinese market participate in the securitisa - tion business equally with other market partici - pants and are not entitled to special treatment or exemptions under the laws and regulations applicable to securitisation. The products issued by SOEs do not contain any explicit or implicit guaranty by the government.

CHAMBERS.COM