The Main Legal Issues Of Transfer Of Assets In The Asset Securitization

Asset securitization is the process of turning the assets that are short of liquidity but can engender future cash flow into securities that can be sold or transferred in the capital market through certain arrangement of reconstructing the risk and benefit of the assets. Since its appearance in America in 1960's, asset securitization develops prosperously in the world relying on its advantages in legal institutional arrangement and economic functions. Asset transfer is one of the most important parts in the deal structure of securitization which refers to the process of transferring basic assets from the sponsor (original rights-and-interests-owner) to special purpose vehicle. Employing the methods of comparison research, economic-legal analysis and legal hermeneutics analysis, the article studies the legal issues concerning the transfer of basic assets during the course of asset securitization. This article consists of five chapters and the main content of each chapter are as follows:The first chapter is a summary of basic theories on assetsecuritization. Through an analysis on different viewpoints regarding"what is asset securitization" , the chapter offers a reasonabledefinition. In succession, there is a discussion on the legalcharacteristics from the angle of financing form and credit foundation.The second chapter is about the basic quality, legal nature and assignability of basic assets. The securitization asset not only characterizes high stability, homogeneity, low risk, but also need to considerate the laws and the fundamental contract in order to assure its legitimacy grounds. Besides, this chapter analyzes the assignability of future avails or future creditor' s right.The third chapter analyzes several methods of asset transfer. Assignment of creditor' s right is the most popular and thorough form of asset transfer, which could fulfill the requirement of bankruptcy risk insulation and less cost to deal with great number of debtors. In succession, there is a discussion on the issue of notifying the debtors when assigning securitization asset. The forth chapter describes the system value, legal characteristics and organization form of SPV which is the assignee of transferred asset. This chapter also studies the legal obstacles existing under current law frame in our country and puts forward some suggestions.The fifth chapter discusses the issue concerning the legal identification of asset transfer. Asset transfer has to be recognized to the extent of true sale in the term of both accounting rule and law. The identification of asset transfer as true sale is essential to the success of asset securitization. This chapter discusses various factors court may consider concerning recharacterizing the nature of asset transfer in detail and analyses the standard of true sale in China.