The seventh part of the Supreme People's Court's Minutes of the National Court's Civil and Commercial Trial Work Conference (Law [2019] No.254) (hereinafter referred to as Minutes of Nine Persons or Minutes of the Conference) sorts out several controversial issues in the practice of commercial trust contract disputes.

The seventh part is "commercial trust contract disputes", from 88 to 96, ***9. I list 13 questions, which may be more convenient to understand.

1. What is the difference between transaction management trust and active management trust?

The concepts of "transaction management trust" and "active management trust" are roughly equivalent to the concepts of "passive management trust" and "active management trust" put forward by regulators.

We can basically understand that the trust channel business is a passive management trust and a transaction management trust.

The key to distinguish transaction management trust from active management trust lies in whether the trustee is the real decision maker of trust plan or not. In a transaction management trust, the trustee's responsibilities and obligations are generally much smaller.

2. Is the trustee limited to trust companies in commercial trust disputes?

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It also includes other financial institutions that conduct asset management business in accordance with the Guiding Opinions on Regulating Asset Management Business of Financial Institutions (new asset management regulations). The financial institutions here include banks, trusts, securities, funds, futures, insurance asset management institutions and financial asset investment companies.

There are different views on the legal nature of various asset management products: some think it is a trust legal relationship, while others think it is a trust legal relationship. Different views have also led to disputes over the application of the law. Some people think that trust law should be applied, some people think that securities law should be applied, and some people think that trust law and securities law should be combined into one. Different applicable laws will lead to great differences in trial results.

The minutes of this meeting first confirmed the meaning of business trust disputes, and confirmed that the asset management products developed by other financial institutions conform to the applicable trust law, which is the characteristic of trust relationship: "for the purpose of obtaining trust remuneration, accept the entrustment of the principal and handle trust affairs as the trustee".

3. Is the dispute arising from the foreign investment after the trust company raises trust funds a business trust dispute?

Don't belong.

Only disputes between trust parties are commercial trust disputes, and only principals, trustees and beneficiaries are trust parties. Disputes arising from the foreign investment behavior of the trust plan are determined by the actual legal relationship and do not belong to commercial trust disputes.

Commercial trust is usually divided into four parts: offer, investment, management and withdrawal, in which offer is the behavior of commercial trust. In the legal relationship of trust funds' external transactions, the counterparties of trust companies may be buying and selling, lending, setting up a company, setting up a partnership, etc. Of course, these legal relationships should be confirmed according to the actual legal relationship, but if one party is a trust company, it cannot be defined as a trust relationship, and the corresponding dispute has nothing to do with investors, nor is it a business trust dispute, which may be a loan dispute or a capital contribution transfer dispute.

4. Is the right to return on assets legal and effective?

Effective.

In fact, the right to return on assets is not a right form stipulated in the Property Law, but a right form created by financial institutions in advance. There is no clear legal provision, but it is widely used as the target of transfer and repurchase by financial institutions such as trusts in practice. For example, usufructuary rights of specific assets such as equity, stocks, bonds, bills, creditor's rights, real estate, and projects under construction. And these usufructuary rights often cannot be publicly transferred, delivered or registered.

The minutes of the meeting affirmed the effectiveness of income right as the basic asset of asset management business.

5. Is it effective to exchange inferior level for priority commitment in graded asset management products? Is it compliant?

Effective, non-compliant.

The minutes of the meeting acknowledge that the secondary beneficiaries have the obligation to make up the difference to priority beneficiaries.

In practice, in structured/graded asset management products, the inferior beneficiary unilaterally provides enhanced funds. When the income of asset management products is insufficient to pay the priority income, the inferior share subscriber promises to make up, that is, undertakes the obligation to make up the difference. Structured/hierarchical arrangement actually has the commercial effect of giving priority to inferior guarantee.

However, according to the relevant provisions of the New Regulations on Asset Management, the inferior beneficiary shall not protect the principal and income of priority beneficiaries. Graded products that violate the new regulations on asset management may be punished by the regulatory authorities, but the effectiveness of the contract will not be affected.

6. Are the credit enhancement documents such as third-party balance replenishment, fulfillment of due repurchase obligations on behalf of third parties, and liquidity support valid?

Effective.

7. What is the nature of the third-party balance and other credit enhancement commitments?

Guarantee the contractual relationship unless otherwise agreed.

The minutes of the meeting made it clear that the parties outside the trust contract provided similar commitment documents as credit enhancement measures, such as third-party balance compensation, performing repurchase obligations on behalf of them, and liquidity support. If the content conforms to the legal provisions on guarantee, the contractual relationship is regarded as guaranteed.

However, of course, it is not all a guarantee contract relationship, and its content determines the corresponding rights and obligations according to the specific content of the commitment document. Such as agency performance, debt participation, unilateral promise and other different legal nature.

8. Is the guarantee clause still valid?

Invalid. But it only means that the guarantee or just-exchanged terms of financial institutions are invalid.

There are two kinds of redemption, one is the redemption promise made by financial institutions as trustees to beneficiaries (investors), and the other is the redemption promise made by inferior beneficiaries to protect capital and interest.

Article 2 of the new asset management regulations stipulates that "asset management business is off-balance-sheet business of financial institutions, and financial institutions shall not promise to protect capital and income when carrying out asset management business. When payment is difficult, financial institutions may not advance in any form. Financial institutions may not carry out on-balance-sheet asset management business. "

Therefore, for the first type, which is one of the most important red lines of asset management products, the minutes of the meeting think that it will be deemed invalid. Moreover, it is not based on the form, but on the essence to examine whether it conforms to the insured price and fair exchange. If there is such a commitment, the beneficiary can only bear the investment risk, but can request the trustee to bear the liability for compensation for the fault.

However, we have also noticed that the regulatory authorities also have prohibitive provisions on the second type of convertible bonds. Article 2 1 of the new asset management regulations stipulates that "graded asset management products shall not directly or indirectly provide the priority share subscribers with the arrangement of guaranteed capital and guaranteed income". However, in the article on the determination of the effectiveness of classified asset management products, the minutes of the meeting were not determined as invalid according to the provisions of the new asset management regulations, but were determined as effective. It shows that there are similarities and differences between judicial adjudication and industry supervision.

For the follow-up content, please pay attention to the judgment rules of the Supreme Court's Minute of Nine Citizens on the Trial of Commercial Trust Disputes 13 (Part II).