Q: What are the most recent developments in the PRC legal system for the securitisation of commercial property?
A: On 15 March 2013, the China Securities Regulatory Commission (CSRC) issued the Administrative Provisions for the Asset Securitisation Business of Securities Companies, manifesting the newest developments in China’s legal system for securitisation of commercial property.
As compared to previous regulations, such as the Guidelines for the Pilot Projects for the Enterprise Asset Securitisation Business of Securities Companies (for Trial Implementation), the administrative provisions expressly specify for the first time that commercial property and other such immovable assets may serve as underlying assets for asset securitisation.
The provisions also expand the scope of financial institutions that may engage in the commercial property securitisation business. Pursuant to article 45 of the administrative provisions, the offering and transfer of asset-backed securities on the exchanges specified in article 6, by securities investment fund management companies, futures companies, securities financing companies and other companies subject to CSRC regulation, as well as commercial banks, insurance companies, trust companies and other such financial institutions, are governed by the administrative provisions mutatis mutandis. Accordingly, the entities that may engage in the securitisation of commercial property have been expanded to cover almost all existing financial institutions.
The administrative provisions strengthen the circulation arrangements for asset-backed securities. Article 6 says “asset-backed securities may, in accordance with regulations, be transferred on a stock exchange, the quotation and transfer system of the Securities Association of China, the securities company over-the-counter market or other CSRC-recognised exchange”. This provision is conducive to the trading and circulation of asset-backed securities, and to the realisation of the asset securitisation of commercial property.
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Zhang Xianzhong is a partner at AnJie Law Firm
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