| “Purchase Money Security Interest”(PMSI)is a new provision made in article 416 of the Civil Code of the People’s Republic of China in which a new credit provider provides credit to the subject matter purchased by the debtor and enjoys priority over other prior security interests in the subject matter.The birth of this system objectively broadens the market financing channels,enhances the vitality of the trading market,and more appropriately balances the interests of all right holders.However,the existing legal rules are very concise and thin,the constituent elements and scope of application are ambiguous,and the priority rules on liquidation do not fully achieve the level of clarity required by modern movable secured transactions law.In order to better apply the law,it is necessary to study the normative value,structure,and institutional effect on the basis of China’s existing regulations.In terms of proving the necessity of introducing PMSI,the necessity of introducing PMSI is determined in terms of breaking financing monopolies,improving debt security and enhancing credit expectations.With regard to the requirements for the establishment of PMSI,the types and scope of collateral are limited,and it is not appropriate to create PMSI in special movable property such as motor vehicles,ships,aircraft,intellectual property rights,equity and other intangible property;Registration of PMSI within the grace period should be effective retroactively to the time the PMSI is created;The 10-day grace period is the statutory grace period,calculated from the date of delivery,in addition to actual delivery,simple delivery and instruction delivery that can achieve the purpose of transferring ownership of the subject matter of transfer are also effective delivery methods.When the subject matter of PMSI is re-traded,it should be made clear that the buyer rule may apply to PMSI provided that the conditions provided for by law are met;When the subject matter of PMSI is leased,the priority of PMSI holders and lessees is determined on the basis of the order in which their rights are established;The conclusion that PMSI registered within an established grace period can oppose enforcement claims and insolvency claims arising during that period is consistent with a comparative law approach;When a claim is assigned,PMSI is transferred as collateral with the claim without changing its legal effect.With respect to the rules applicable when PMSI compete with other security and non-security interests,PMSI have priority over both prior floating mortgages and fixed mortgages registered within the grace period;The priority of liens over PMSI reflects China’s consistent position of "priority of statutory security rights over intended security rights";When several PMSI are contested,no distinction is made between the types of rights subjects,and the order of settlement of each right holder is determined according to the order in which registration is processed,and those registered on the same day are in the same order of liquidation;In order to protect the rights and interests of socially vulnerable groups,priority over PMSI should be paid in priority. |
