CHINA Law and Practice Contributed by: Borong Liu, Xiaoli Liu, Jingyi Lu and Zhijie Zhang, Zhong Lun Law Firm
8.2 Dealing With Legal Issues For de-recognising financial assets, at the request of the accountant, the legal counsel may have to modify some specific provisions in the transaction documents, subject to the con - sent of the participating parties. According to the Measures for Supervising and Administrating the Pilot Securitisation of Credit Assets of Finan - cial Institutions, a legal opinion from a practising lawyer is also needed to prove that the originator does not have any actual or indirect control over the credit assets that have been transferred, and that the transferred credit assets have achieved bankruptcy remoteness from the originator.
financial assets. In most securitisation transac - tions, before sending the notice of transfer to the debtors, the originator still bears the obli - gation to pass on the cash flows of the finan - cial assets. Therefore, the accountant needs to conduct the “pass-through test” by examining whether the originator has complied with the “no-advance”, “no-misappropriation” and “no- delay” principles, which involves an inspection of the advance payment and reimbursement by the servicer, investment of idle funds, frequency of cash flow allocation, and other transaction arrangements.
61
CHAMBERS.COM
Powered by FlippingBook