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