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Dong Wan: Analysis on Legal Risks in Underlying Assets and Transaction Structure of Supply-chain ABS of Transport Construction Engineering Enterprise

2019.05.08  

Author: Zhong Yin Law Firm   

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“2019 Annual Conference of China’s Asset Securitization & Structured Finance and the 5th Annual Conference of China Asset Securitization Forum” organized by the Asset Securitization Forum (the “Forum”), CITIC Securities, China Merchants Securities and other institutions, and co-organized by ZhongYin Law Firm, Bank of Beijing and other entities was solemnly held in Beijing on May 6-8, 2019.

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During the event, many domestic and overseas asset securitization experts from banks, law firms, securities companies and financial enterprises delivered important speeches at the main and branch venues, closely sticking to current hot issues in the asset securitization industry, and gave advice and suggestions on the development of the industry. Dong Wan, management committee member and senior partner of ZhongYin, and member of council of the Forum, on the theme of “Supply-chain Securitization and Finance of Transport Construction Engineering Enterprise”, shared with the participants her analysis on legal risks in underlying assets and transaction structure of supply-chain ABS of transport construction engineering enterprise and other issues.

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Dong Wan summarized and analyzed transport construction engineering enterprise’s types of underlying assets available for supply-chain ABS, identification of legal risks therein, and differences between legal structures for payment confirmation.

Dong Wan pointed out that the products currently on the market are mainly backed by the accounts payable by transport construction engineering enterprise to upstream suppliers, including prices for goods, services, leases, and construction subcontracting. Enterprises may securitize the payables incurred during the courses of professional work subcontracting and labor subcontracting. With respect to the supply-chain ABS, the review on the authenticity and compliance of underlying assets cannot be neglected due to good credit of core enterprises. In particular, legal risks such as the legality of subcontracting and the validity of subcontract shall be carefully checked.

Finally, Dong Wan analyzed the differences between different legal structures for payment confirmation. The legal relationships established by different arrangements for payment confirmation are different and have their respective advantages, risks and pitfalls. It is worth noting that when these legal structures fail to achieve complete transfer of right of obligatory claim or establish unconditional right of claim, there is a possibility that the debtor will raise a defense, at which point the special plan manager shall bear the burden of proof in respect of the right of obligatory claim transferred to it. This increases the management risk of the special plan, and this risk needs to be paid attention to and avoided in the transaction design.

The asset securitization team of ZhongYin Law Firm is deeply involved and has rich practical experience and success cases in the area of asset securitization. It has established close cooperative relationship with large transport construction engineering enterprises, successively represented many engineering divisions under China State Construction and China Railway on asset securitization, and also participated as legal counsel in issuance of many works of supply-chain securitization.


Relevant lawyers

  • Dong Wan

    dongwan@zhongyinlawyer.com

    -Member of Management Committee

    -Senior partner