1 The general meaning of trust

The so-called trust (English is "Trust"), "xin" means trust, loyalty and reliability, and "trust" means entrustment and entrustment. The two words "xin" and "entrust" together have the meaning of "trust and entrust" and "trust and entrust". "Trust" is the premise of "trust". Only when you understand the other party's situation, believe it to be honest and reliable, and have the conditions to entrust it, can trust behavior be possible. This is the general meaning of trust.

2 The legal meaning of trust

According to the "Trust Law of the People's Republic of China", trust refers to the trustor entrusting his property rights to the trustee based on his trust in the trustee. A person is managed or disposed of by the trustee in his own name according to the wishes of the trustee for the benefit of the beneficiary or for a specific purpose. In short, a trust is an institutional arrangement for managing property for the benefit of others or for a specific purpose, that is, "being entrusted by others to manage finances on their behalf."

Using the principle of trust, a person (the trustor) can transfer property rights to a person he trusts and has the ability to manage the property (the trustee) when he is unable or unwilling to manage the property himself. And instruct the trustee to use the trust property and its income for the benefit of himself or a third party (beneficiary).

3 The difference between trust, entrustment and agency

As a unique legal design regarding property transfer and property management, trust is very different from entrustment and agency. In short, this difference is manifested in the following aspects:

First, the establishment conditions are different. To establish a trust, there must be certain trust property. If there is no legally owned property that can be used to establish the trust, the trust relationship cannot be established. The principal and agency relationships do not necessarily presuppose the existence of property.

Second, the names are different. In a trust relationship, the trustee acts in his or her own name, whereas in a general entrustment and agency relationship, the trustee (or agent) acts in the name of the principal (or principal).

Third, the nature of the property is different. In a trust relationship, the trust property is independent of the trustee's own property and the trustor's other properties. The trustor, the trustee or the beneficiary's creditors are generally not allowed to claim rights over the trust property. However, in the relationship of entrustment and agency, the creditors of the principal (or the agent) can claim rights over the entrusted property.

4 Institutional advantages of trust

Compared with similar legal systems, trust is a more effective institutional design for property transfer and management. Its advantages are mainly reflected in The following three aspects:

First, the trust system is conducive to long-term planning. The existence of the trust has continuity. A trust does not terminate due to the death, dissolution, bankruptcy, resignation, dismissal or other circumstances of the trustee. It has a certain degree of stability and long-term nature, and is therefore more suitable for long-term planning of property transfer and property management.

Second, the trust system is relatively flexible to use. This is reflected in the following aspects: (1) Trust establishment methods are diversified, and trust contracts, other written forms, and wills can be used. (2) Trust property is diversified. Anything with monetary value, whether it is movable or immovable property, real rights or creditor's rights, tangible or intangible, can be used as trust property to establish a trust. (3) The purpose of trust is liberalized. As long as it does not violate the mandatory provisions of the law and public order, the trustor can create trusts for various purposes. (4) Trust application areas are very broad and there are many types of trusts.

Third, the interests of beneficiaries can be effectively protected. On the one hand, the ownership and beneficial rights of trust property are separated. Legally, the trust property does not belong to the settlor or the beneficiaries, but is placed in the name of the trustee. The trustee enjoys the property rights in the trust property in accordance with the law and trust documents, and has the right to manage, use and dispose of the trust property in his own name. The settlor and the beneficiary have no right to manage and dispose of the trust property, but the benefits generated by the trust belong to the beneficiary.

On the other hand, trust property is independent, which makes the trust property immune from the recourse of creditors of the settlor or trustee, thereby giving the beneficiary rights to the trust property that have priority over the creditors of the settlor or trustee.

5 Independence of trust property

The "Trust Law" stipulates that the property acquired by the trustee as a result of the trust's promise is trust property. In addition, property acquired by the trustee due to the management, use, disposal or other circumstances of the trust property is also included in the trust property. However, property prohibited from circulation by laws and administrative regulations shall not be used as trust property. Properties whose circulation is restricted by laws and administrative regulations can only be used as trust property after being approved by the relevant competent authorities in accordance with the law.

The independence of trust property includes the following four points:

First, trust property is distinguished from other properties for which the trustor has not established a trust. After establishing a trust, if the trustor dies or is dissolved, revoked or declared bankrupt in accordance with the law, if the trustor is the only beneficiary, the trust shall be terminated and the trust property shall be treated as his inheritance or liquidation property; if the trustor is not the only beneficiary, the trust shall be When death or dissolution in accordance with the law, revocation in accordance with the law, or declaration of bankruptcy, other beneficiaries still exist, and the trust property as a whole cannot be used as the trustor's inheritance or liquidation property. Only the trust beneficiary rights enjoyed by the trustor can be regarded as his inheritance or liquidation property. .

Second, trust property is distinguished from property owned by the trustee. Trust property is distinct from the inherent property belonging to the trustee and shall not be included in or become part of the inherent property of the trustee. If the trustee dies or is dissolved in accordance with the law, is revoked in accordance with the law, or is declared bankrupt and terminated, the trust property shall not belong to his estate or liquidation property. In other words, the trust property is non-inheritable to the trustee and will not be included in his estate when he dies; it will not be included in his liquidation property when the trustee becomes bankrupt.

Third, restrictions on the enforcement of trust property. The "Trust Law" stipulates that no enforcement of trust property is allowed except for one of the following circumstances: (1) Before the establishment of the trust, the creditor has enjoyed priority rights to receive payment for the trust property and has exercised this right in accordance with the law; (2) Debts incurred by the trustee in handling trust affairs, and creditors require repayment of the debts; (3) Taxes borne by the trust property itself; (4) Other circumstances stipulated by law. That is to say, under normal circumstances, because the trust property is separated from the trustee's inherent property, once a trust is created, the property set up by the trust is "self-sealed", whether it is the creditor of the trustee's inherent property or the trustee. Creditors of other trust properties managed by the person cannot apply for enforcement against the trust property.

Fourth, restrictions on offset of trust property. The claims arising from the trustee's management, use and disposal of trust property shall not be offset by the debts arising from its inherent property. The claims and debts arising from the trustee's management, use and disposal of trust properties of different trustors shall not be offset against each other. This legal provision is intended to protect trust property from the trustee.

6 Application of the independence of trust property

The independence of trust property is the biggest feature of the trust system and the key to the wide application of the trust system. Trusts can take advantage of the institutional advantage of the independence of trust property to provide very effective services to enterprises. The application of trust system in the process of asset securitization is a typical example.

Asset securitization is the reorganization of the risks and benefits of assets held by financial institutions or other enterprises that lack liquidity but can generate predictable and stable cash flows through certain structural arrangements. , using original assets as collateral to create securities that can be sold and circulated in the financial market.

In the process of asset securitization, there must be a special purpose vehicle (SPV) for asset securitization. Establishing an SPV in the form of a trust can make full use of the independence of the trust property and protect the securitized assets. The original equity owner of securitized assets can transfer the assets that are the subject matter of the securitization to a trust company as an SPV, establish a trust, and then issue securities through the trust.

This trust arrangement creates a firewall between the original equity holders of the securitized assets and the SPV and investors. The securitized assets transferred by the original equity holder to the SPV become independent trust properties and are nominally owned by the SPV. The operating risks of the original equity holders will not affect the trust property. When the original owner becomes bankrupt, his creditors have no recourse to the trust property. The bankruptcy risk of the original owner of securitized assets is effectively isolated from the securitization transaction. In the process of asset securitization, trust property is also different from the inherent property of the SPV. When an SPV is legally dissolved, revoked, or terminated by being declared bankrupt, the trust property will not be included in its liquidation property. Once the SPV fails, its creditors have no recourse to the trust property.

With the continuous development and improvement of my country's market economic system and financial market, the relevant systems of law, taxation, accounting and foreign exchange management required for asset securitization will gradually be established. It is foreseeable that trust investment companies will play an increasingly important role in my country's asset securitization market.

7 The Origin and Development of Trusts

Modern trusts originated from the British Us system in the 13th century and have a history of more than 800 years. In medieval England, property transfer was subject to legal restrictions, and people used trusts to circumvent such legal restrictions. Therefore, trusts did not initially have the function of property management. With the development of society and economy, restrictions on property transfer have gradually been lifted, and the main function of trusts has changed from the earliest transfer of wealth to modern professional property management.

Since the late 19th century, trusts have flourished in the United States as a for-profit organization. At the beginning of the 20th century, Japan actively innovated after introducing the trust system from Europe and the United States. The trust industry led by trust banks developed rapidly and has now become one of the countries with developed trust industries.

With the development of the trust system, the commercialization tendency of trust instruments has become increasingly obvious. Dominating modern trust activities are various profit-oriented trust institutions. In the United States, there are mainly professional trust companies and trust departments in commercial banks; Japanese trust institutions are trust banks that mainly engage in trust business and also engage in banking business; other countries have such trust institutions that dominate modern trust activities.

Modern trust shows a trend of financialization. Trust activities are increasingly becoming a financial activity, and the financial nature of trust business is becoming increasingly obvious. This can be attributed to the following two reasons. One is the increasing financialization of wealth. In the early days of the development of trusts, the property used for trusts was mainly land, and later some movable properties appeared. As the economy continues to monetize, wealth also begins to become financialized. As the property held in trust becomes increasingly financialized, so does the entire trust activity. The second reason is the financialization of how property is managed. The early property management methods were more of a custody and disposal nature. Modern financial management is mainly achieved through financial instruments. Today's trust institutions are generally financial institutions, and together with banks, securities and insurance, constitute one of the four pillars of the modern financial industry.

The trust business in developed countries is divided according to the entrusted objects, and can be divided into personal trusts, legal person trusts and trusts of both individuals and legal persons. Personal trusts include trust services such as personal management and guardianship of property, execution of wills, estate management, financial consulting and financial agency. Corporate trusts mainly include the fiduciary business of issuing corporate bonds, the fiduciary business of business management trusts, the agency stock transfer registration and dividend payment business, and the provision of business merger, reorganization and liquidation services. Trusts for both individuals and legal persons mainly include charitable trusts, annuity trusts and employee stock ownership trusts.

8 The History and Current Situation of China’s Trust Industry

The development of China’s trust industry can be traced back to the early 20th century. In 1918, Zhejiang Industrial Bank started a safe deposit box rental business with a trust nature; in 1919, the Shanghai Branch of Juxingcheng Bank established a trust department; in 1922, Shanghai Commercial Savings Bank changed the safekeeping department into a trust department and started a personal trust deposit business. These are the first three financial institutions to operate trust business in my country, marking the beginning of China's modern trust industry.

After the founding of the People's Republic of China, the objective conditions for the existence of trusts disappeared under the planned economic system, and all trust businesses were discontinued by the mid-1950s. In 1979, marked by the establishment of China International Trust and Investment Corporation, China's trust industry recovered. From the establishment of China International Trust and Investment Corporation in 1979 to the present, the trust industry has made a great contribution to China's economic construction in more than 20 years of development. However, due to various reasons, the development of China's trust industry has gone through twists and turns and adjustments. .

The first rectification of China’s trust industry occurred in 1982. The scale of investment in infrastructure at that time was too large, especially the introduction of trust loans. In order to strengthen the management of trust investment business and improve infrastructure investment behavior, the People's Bank of China decided to rectify the trust industry.

The second rectification was in 1985. It was caused by the extensive use of trusts for credit activities before 1984, but the source of trust funds was unclear, which could easily lead to excessive growth of financial credit and cause loss of control. Therefore, the People's Bank of China issued the "Interim Provisions on the Management of Financial Trust Investment Institutions" to clearly define the sources of trust funds.

The third rectification occurred in 1988. After the rapid expansion of the number of trust investment companies and the serious phenomenon of "three chaos" (indiscriminate fund-raising, indiscriminate borrowing and lending, and indiscriminate lending), the State Council decided to rectify the financial environment.

The fourth rectification was in 1995. The main reason was that trust companies engaged in illegal activities such as soliciting deposits at high interest rates. The main event was that China Rural Credit Co., Ltd. was closed down in 1994 and Bank of China Credit Co., Ltd. was taken over by China Guangdong Development Bank. The reorganization led to the decoupling of the four major state-owned banks and trusts.

The last overhaul took place in 1999. In March 1999, the State Council announced the start of the fifth clean-up and rectification of China's trust industry, with the principles of "trust-based, separate operations, large-scale operations, and classified disposals."

The fifth rectification, which began with the bankruptcy case of Guangdong State Investment Corporation in 1998, is considered a fundamental change in the trust industry. During this clean-up and rectification, the "Trust Law", "Measures for the Administration of Trust Investment Companies" and "Interim Measures for the Management of Capital Trust Business of Trust Investment Companies" were promulgated and implemented. The supervisory authorities adhered to the principle of "resolutely turning trusts into real trusts, With the attitude of "not letting problematic companies stay", many small and insolvent companies have been cancelled. Only about 60 of the existing 239 trust companies will eventually be approved to re-register.

With the fifth clean-up of trust investment companies and the promulgation of "One Law and Two Rules", most trust institutions follow modern enterprise management in terms of share capital structure, enterprise model, internal control mechanism, management system, etc. The requirements and market-oriented standards have been significantly adjusted, and some trust investment companies with advanced concepts and flexible mechanisms have begun to coordinate their development strategies.

According to the provisions of the "Administrative Measures for Trust Investment Companies", trust companies are the only financial institutions that can be involved in the capital market, money market and industrial market at the same time. On July 18, 2002, the day the "Interim Measures for the Management of Fund Trust Business of Trust Investment Companies" was promulgated, Shanghai Aijian Trust Investment Company launched the first domestic standard trust product - the Shanghai Outer Ring Tunnel Project Fund Trust Plan. In September, Beijing International Trust and Investment Co., Ltd. launched Beijing's first trust product, the CBD Central Business District Trust, which was successfully sold. Since then, various trust products have sprung up, from infrastructure construction to management buyouts, from tunnel projects to real estate development, from housing mortgages to car mortgages, from foreign exchange trusts to financial leasing, trust products are playing an active role in various fields. role.

9 The business positioning of trust investment companies

Before 1998, my country’s trust and investment companies were actually a kind of trust investment company with banking business as its core and concurrently engaged in securities business and industrial investment business. Mixed business financial institutions. Since 1998, the state has made major adjustments and repositioning of the trust industry. After the promulgation of "One Law and Two Rules", the positioning of the trust industry was clarified, and asset management business, some investment banking business and self-operated business became the three core businesses of the re-registered trust investment company.

The first core business is asset management business. According to regulations, trust investment companies can operate asset management business in two ways: entrustment and trust. (1) Adopt a trust method to manage assets. A trust investment company can be entrusted with the trust business of funds, movable properties, real estate and other properties, that is, the client entrusts the trust investment company with its legally owned funds, movable properties, real estate and intellectual property rights and other property and property rights in accordance with the agreed conditions and purposes. Manage, use and dispose of it. In addition, charitable trusts are also one of the asset management businesses that trust investment companies can carry out. (2) Adopt an agency approach to manage assets. According to regulations, trust investment companies can act as agents for the management, use and disposal of property; they can also engage in custody business.

The second core business is part of the investment banking business. Investment banking business in a broad sense includes securities underwriting and proprietary trading, corporate finance, corporate mergers and acquisitions, investment consulting, fund management and risk capital management, etc. According to regulations, trust investment companies cannot engage in other traditional securities business except underwriting treasury bonds, policy bank bonds and corporate bonds. Trust companies cannot directly intervene in public funds. They can only indirectly intervene in public fund business by sponsoring and establishing funds or fund management companies, but they can directly operate private fund business. In addition, trust investment companies can engage in intellectual-intensive investment banking services such as the reorganization of corporate assets, acquisitions and project financing, corporate finance, and financial consulting.

The third core business is self-operated business. The funds that can be used in accordance with regulations under the owner's equity of a trust investment company can be deposited in banks or used for inter-bank lending, loans, financial leasing, investment and other businesses. Trust investment companies can provide guarantees for others with their inherent properties; with the approval of the People's Bank of China, they can handle inter-bank lending.

In addition to the three core businesses above, trust investment companies can also operate intermediary businesses including credit witnessing, credit investigation and economic consulting services.

10 Collective Fund Trust Plan

The "Collected Fund Trust Plan" is a project in which multiple investors (trustors) entrust their legally owned funds based on their trust in the trust investment company. A trust investment tool that is given to a trust investment company and is collectively managed by the trust investment company and used in a certain trust plan project to obtain investment income for investors. In short, a collective fund trust plan is a non-public investment fund. The investment direction of raised funds can be through various means such as loans, securities investment, industrial investment, equity investment and leasing.

Collective fund trust plans are different from securities investment funds and cannot currently be publicly raised. According to current regulations, a trust plan cannot have more than 200 entrustment contracts, and the amount of each contract cannot be less than 50,000 yuan. Trust and investment companies cannot market and promote collective fund trust plans through public media such as advertisements. Therefore, investors can only learn about the trust and investment company’s customer service personnel, websites, consultation telephone numbers, agent banks, and third-party financial institutions. For collective fund trust product information, a contract is ultimately signed with the trust company.