In the securities industry, spv company refers to special purpose vehicle, also known as special purpose institution/company. Its function is to purchase and package securities assets, and issue securities assets on this basis, and raise funds from overseas investors in the process of issuing securities assets overseas. It refers to a special entity that accepts the assets of the promoters and issues the securities it supports. The original concept of special purpose company originated from the risk isolation design of Chinese wall, mainly to achieve the purpose of "bankruptcy isolation".
The business scope of special purpose vehicle is strictly limited, so it is a high credit entity and will not go bankrupt. SPV occupies a special position in securities and assets, and it is the core of the whole process of securities and assets, and all participants will work around it. There are two main forms of special purpose companies: special purpose companies and special purpose trusts. Generally speaking, special purpose companies do not need registered capital, nor do they have fixed employees or office space. All functions of special purpose institutions are assigned to other professional institutions in advance.
Special purpose companies must ensure independence and bankruptcy isolation. When a special purpose institution is established, it is usually owned by a charity or an unrelated organization, so the special purpose institution will operate in accordance with established laws and regulations to avoid conflicts of interest and favoritism. The assets and liabilities of special purpose companies are basically equal, and their residual value can be basically ignored. A special purpose company can be a legal entity. Special purpose companies can be shell companies. A special purpose company can also be an intermediary of national credit.
Industry Status of Special Purpose Companies in China
1. Trust form
The significance of spv depends on its existing form. As of1March, 1995, there were 392 trust institutions with legal personality in China, with total assets exceeding 600 billion yuan, accounting for 10% of all financial assets. The development of trust industry makes up for the shortage of traditional single bank credit in China, and provides a good way to use social idle funds, introduce foreign capital, expand investment channels and promote the development of market economy.
Due to historical reasons, trust and investment companies are familiar with loan business, maintain good relations with banks, engage in securities underwriting business and are familiar with the securities market. Some trust and investment companies wholly-owned by local finance, government departments and banks have certain official status, which is of unique significance to non-performing securities assets and housing mortgage loans with strong policies.
At the same time, since 1998 China government rectified the trust industry, trust and investment companies have been closed and transferred on a large scale. Most other trust and investment companies are controlled by local financial institutions, with sufficient funds, reasonable capital structure and good reputation. In particular, China International Trust and Investment Corporation still has a certain influence in the international financial market, and has issued many securities and bonds abroad, which is the earliest window for China to introduce foreign capital. Therefore, some trust and investment companies have the conditions to become pilot securities assets.
2. Corporate form
There are five kinds of companies in China: limited liability company, joint stock company, unlimited liability company, joint stock company and joint stock company. China's limited liability company refers to an enterprise legal person composed of no more than a certain number of shareholders (less than 50). Each shareholder shall be liable to the Company to the extent of its capital contribution, and the Company shall be liable to the creditors to the extent of all its assets. China's legislation on limited liability companies is relatively perfect, and special purpose institutions can adopt this form. There are several situations that can be analyzed in detail.
One case is a wholly state-owned company. For example, the United States has the National Mortgage Association, the Federal National Mortgage Association and the Federal Housing Mortgage Corporation, and Hong Kong has the Securities Mortgage Corporation. These practices can be used for reference. We can also set up a wholly state-owned company supported by the government, whose business is to buy housing mortgage loans issued by banks and commercial banks and issue asset-backed securities. Its first registered capital is invested by the fund and the special government.
After that, corporate bonds can be issued to raise funds, and the funds raised are specially used to purchase housing mortgage loans. This model should be based on the provisions of the Company Law on wholly state-owned companies. According to the company law, wholly state-owned companies are also eligible to issue corporate bonds. Therefore, this model is very realistic and operable, and there are basically no legal obstacles.