Practical Dilemmaand Improvement Path Of Corporate Bond Trustee Arrangements

Since bond market broke rigid payment in 2014,bond defaults have gradually become normalized.Handling bond defaults by the principle of market-oriented and law-based requires improving corporate bond trustee arrangement to focus on protecting the legitimate rights and interests of bond investors.As an important institution for bond management and default disposal,bond trustee is ineffective in the period of rigid redemption and poor performance in the period of normalized disposal of bond defaults.It can be seen that current dilemma of corporate bond trustee arrangements is that trustee cannot play the role of protecting bond investors.At present,under background of normalization of bond default,the key points of bond market construction is how to strengthen the protection of bond investors’ rights and interests.In addition to preface and conclusion,the full text is divided into four parts.The first part is analysis of corporate bond trustee arrangements’ value.Firstly,difficulties in collective actions and asymmetric information make bond investors in a weak position and must rely on the professional ability of trustee to protect their interests.Secondly,corporate bond trustee arrangements can reduce communication cost between bond investors and bond issuers.Finally,bondholders meeting system cannot provide continuous professional protection for bond investors,corporate bond trustee arrangements can make up for its shortcomings.The second part,analyze the dilemma of corporate bond trustee arrangement and the reasons why this system is in trouble.As the main body of this system,trustee is ineffective in the period of rigid payment,and perform poorly in the period of normalized default,failing to effectively protect bond investors’ rights and interests.The dilemma lies in the fact that trustee cannot play the role of protecting bond investors’ rights and interests,and reasons for restricting trustee’s function are as follows: Firstly,trustee’s role is deviated.From the perspective of legislation,China legislation has not yet made it clear whether bond trusteeship management relationship is a principal-agent relationship or a trust legal relationship.From the perspective of the source of rights,the source of trustee’s rights implies the meaning of principal-agent,but specific legal provisions are inconsistent with principal-agent.Secondly,there are following deficiencies in setting of trustee’s duties: current laws and regulations lack not only connotation and scope of performance standards,but also identities and means required.Thus these provisions are not practical.Trustee adheres to “low authority and low duty” management model,and has less authority to handle bond affairs independently and a narrower scope of duty.The corporate bond trustee arrangements and the bondholders’ meeting system are not properly connected,trustee has no right to speak in matters involving bondholders’ interests.Finally,improper qualification of trustee and imperfect remuneration system lead to a conflict of interest between trustee and bondholders,and it is obviously insufficient to regulate conflict of interest only by information disclosure.The third part compares and analyzes regulations on corporate bond trustee arrangements in foreign countries.Firstly,compare and analyze trustee’s role in the United Kingdom,the United States,Japan and South Korea.Bond trustees in the United Kingdom and the United States are the trustees in trust legal relationship,while bond trustee of Japanese unsecured corporate bonds and South Korean is the agent in a principal-agent relationship.Secondly,compare and analyze trustee’s duties in the United Kingdom,the United States,Japan and South Korea.The most important duty of the United Kingdom for trustee is to abide by the terms of bond trust deed,and trustee has discretion.Prior to a default,indenture trustee of the United States owe a duty to perform ministerial functions with due care before bond defaults;following an event of default,the indenture trustee perform duty in compliance with the prudent person standard.The duties of trustee in Japan and South Korea include repayment,credit preservation and other corporate bond management affairs.Finally,compare and analyze solutions to conflicts of interest in the United Kingdom,the United States,Japan and South Korea.Both the United Kingdom and the United States adopt a certain degree of forbearance in dealing with conflicts of interest.While Japan pays attention to principle of objective and neutrality to avoid conflicts of interest and South Korea adopts a precautionary attitude to deal with conflicts of interest.The forth part puts forward improvement path for corporate bond trustee arrangements in China.Firstly,it should be clear that bond trustee is the trustee in a trust legal relationship,and the legal relationship between issuer,trustee and holder should be re-interpreted based on the principles of trust.Secondly,optimize trustee’s duties by focusing on reconstructing trustee’s duties,giving trustee discretionary power and increasing its fiduciary obligations,so as to transform trustee’s management model into "high authority and high duty" model.At the same time,strengthen deep cooperation between corporate bond trustee arrangements and bondholder meeting system,and improve connection between these two systems.Finally,optimize the qualifications of trustees based on the principle of objectivity and neutrality,and institutions that clearly have an interest relationship with bond issuer shall not serve as the trustee;establish an incentive mechanism for trustees,and provide trustees with economic remuneration corresponding to performance of their duties;strengthen prevention and regulation of conflicts of interest between trustees and bondholders.Divide conflicts of interest’s types based on before bond default and after bond default and set up "special agent" system to coordinate conflicts of interest between trustees and bondholders.