China Industrial International Trust (CIIT) is a subsidiary of Industrial Bank, China’s first commercial bank to explore green finance. As the first “equator bank” in China, Industrial Bank has formed a system of groupwide green finance products and services spanning a wide range of categories.
Relying on its parent bank’s platform and resources, CIIT has established a series of green trust projects in co-operation with the China Environmental Protection Foundation, leveraging its institutional advantages, professional capabilities and customer channels in the field of asset management.
These projects aim at supporting the implementation of green, environmentally friendly charity activities, including but not limited to prevention and control of pollution and other public hazards, protection and improvement of ecological environment, biodiversity conservation, carbon neutrality initiative, green development, water resources protection, and emergency rescue regarding natural disasters, accidents and public health incidents.
This series of green charitable trusts will pursue co-operation in various public welfare fields of ecological conservation and environment protection, with the first pilot field focused on biodiversity conservation. The establishment of the “Xing Charity No. 1 Green Charitable Trust” marks the launch of China’s first green charitable trust with a theme of biodiversity conservation.
Partners Long Haitao and Li Kailun, and associate Zhang Yanjiao, at Merits & Tree Law Offices, provided legal services throughout the establishment of this series of charitable trusts.
The trusts involve multiple transaction subjects. Due to the different regulatory rules applicable to each party, the trusts face challenges in various aspects such as the design of deal structure, the setting up of related mechanisms and the handling of multilateral legal relationship.
In the transaction practice, in order to fully protect the rights and interests of the principal, reduce the transaction difficulties for all parties, and finally achieve the goal of supporting green public welfare undertakings, the lawyers assisted CIIT in legal analysis and verification of the deal structure, and promoted its continual optimisation through rounds of negotiations and consultations, eventually producing legal documents approved by all parties. The trusts are highly duplicable, paving the way for subsequent transactions and laying a solid foundation for the promotion of similar products.
During the process of the trusts, the lawyers assisted CIIT in assessing compliance issues in terms of requirements, peer practices and regulatory scope ‒ such as whether charitable trusts can be offered publicly, whether the principal is eligible as a charitable trustor, and whether the approval mechanism is applicable to charitable trusts ‒ ensuring that CIIT carries out the charitable trusts in compliance with laws and regulations.
The trusts adopt a two-tier trust transaction arrangement, where the upper-tier trusts directly use the trust funds for green charitable projects, or raise funds to set up lower-tier trusts earmarked for green charitable projects. While using direct proceeds for donations to green charitable fields, the upper-tier trusts fully perform service trust functions such as fundraising and account management.
In the asset management and utilisation planning of the trusts, all agreements have taken into full account the co-operation arrangements between the trustee and the project implementer, as well as the screening mechanism and decision execution mechanism of charitable projects.
A charitable project management committee including external expert members is set up to ensure rational and scientific selection of charitable projects at the decision-making level, and to reflect the comprehensive opinions of all parties including the principal. This series of charitable trusts not only ensures the security of trust assets, but also reflects the charitable and public value to the greatest extent.
Furthermore, mechanisms for using idle funds and calculating the value gains were set up, aiming at setting aside value gains of trust funds for donations and giving full consideration to the interests of the donees and principals. These transaction arrangements and related details are innovative among similar products.
The trusts resolved issues in the multi-subject legal relationship among the principals, the beneficiaries and the project implementer, satisfied the compliance requirements under the Charity Law and the Measures for the Administration of Charitable Trusts, and settled the complicated cross-checking relationship between the upper and lower-tier trusts.
At the same time, in terms of convenience, the trustee and the lawyers have made rounds of optimisation on the trust documents. In view of the circumstances of the transaction and the general administrative procedures, the process was simplified to facilitate subsequent operations and the possibility of future electronic transactions was considered to accommodate the electronic operation process while ensuring compliance of information and data processing.
This series of charitable trusts, involving diverse fields, fully embodies the social responsibility of trust companies. It aims to promote the concept of green and sustainable development, and raise public awareness of environment protection through the financial service platform, which attracted broad attention from social media and within the industries of service trusts and charitable trusts.
With the rapid development of service trusts and family trusts, a growing number of trust companies have incorporated charitable trusts into their overall strategic plans to meet customer needs and fulfill social responsibilities.
This series of charitable trusts is a significant endeavour in this field. With continual improvements in the legislation, regulation and market systems, the charitable trust business will benefit from a better environment for development, exert its influence to greater breadth and depth, and make crucial contributions to China’s charity and public welfare undertakings.
Long Haitao is a partner at Merits & Tree Law Offices. He can be contacted on +86 10 5650 0988 or by email at firstname.lastname@example.org
Li Kailun is a partner at Merits & Tree Law Offices. He can be contacted on +86 10 5650 0957 or by email at email@example.com