People's Bank of China, Administration of the Business of Holding Funds in Trust of Trust and Investment Companies Tentative Measures

Promulgated: June 26 2002
Effective: July 18 2002
Interpreting authority: People's Bank of China
Applicability: For the purposes of these Measures, "business of holding funds in trust" means the acts whereby the settlor, based on his trust in the trust and investment company, entrusts the funds lawfully owned by him to the trust and investment company and the trust and investment company manages, uses or disposes of the funds in his own name in accordance with the wishes of the settlor for the benefit of the beneficiary for a specified objective (Article 2).

Main contents: Article 3 states that funds derived from the business of holding funds in trust are not liabilities of a trust and investment company. In the same manner assets formed from the management, use and disposal of trust funds are not assets of a trust and investment company (Article 3). The trust and investment company is forbidden to take deposits, issue securities, borrow foreign loans, promise minimum returns or use mass media for marketing in handling the business of holding funds in trust (Article 4). Where trust funds are collectively managed, used and disposed by a trust and investment company, the number of trust contracts of such nature shall not exceed 200 and shall each have a value of at least Rmb50,000 (Article 6). In addition to a trust contract, the trust and investment company and the settlor shall execute a statement on the risk in management and use of trust funds. This statement shall provide, among other things, that if the trust funds suffer losses as a result of any breach of the trust document by the trust and investment company and if the compensation from the trust and investment company is insufficient to cover the losses, the shortfall shall be covered by the trust property formed from the use of the trust funds (Articles 8 and 9). The trust and investment company shall designate certified trust managers to execute the business of holding funds in trust and shall provide periodic reports on the management of the trust funds (Articles 12 and 18).
Related legislation: PRC, Trust Law, Apr 28 2001, CLP 2001 No.5 p22; PRC, People's Bank of China Law, Mar 18 1995, CLP 1995 No.5 p23 and Administration of Trust and Investment Companies Measures, Jun 5 2002, CLP 2002 No.6 p6