Expanding investment channels for infrastructure development projects

The scope of the investment plan includes national infrastructure development projects, such as transportation (including civil aviation airports), telecommunications, energy, public facilities and environmental protection. Investment in these projects can be by way of credit, equity shares and property rights, as well as other feasible methods.

Until now the relevant government and administrative departments had not promulgated or issued any rules regarding plans involving equity shares or property rights. The Guidelines have further enhanced the operability of investment activities to the infrastructure projects.

Indirect investment
Investment mode
The Infrastructure Debt Investment Plan (IDIP) is a kind of financial instrument with a relatively simple structure from which entities such as insurance asset management institutions raise money. Trustees issue beneficiary certificates of the investment plan, and ensure repayment of the capital and proceeds of the debt investment plan. Money raised and sourced from insurance funds shall be used for specified infrastructure projects under an IDIP.

Constituent relationships
According to the Administrative Measure's stipulations, an investment plan is primarily formed by the following parties:

(1) Trustor: insurance companies, groups and holding companies authorised by the CIRC to be set up in China;

(2) Trustee: trust companies, insurance asset management companies, industrial investment fund management companies or other professional management institutions that invest in infrastructure projects in their own names in accordance with the intentions of the trustees for the benefit of the beneficiary;

(3) Beneficiary: the person or persons as specified in the investment plan that has the right to be benefited;

(4) Custodian: commercial banks or other financial institutions appointed by the trustor that are responsible for asset custody in an investment plan as agreed within the plan;

(5) The independent supervisor: professional management institutions appointed by a beneficiary that are responsible for supervision of investment plan management by the trustees and of project implementation by the project owner.

The Administrative Measures and Guidelines further define the regulations and limits to, among other things, these participants' qualifications, corporate management, internal and external risk management policies, senior manager's qualifications, profit and revenue continuity records.

Issues to be addressed by lawyers
The indirect investment of insurance funds under the IDIP consists of a wide range of constituents and involves a number of participants that are under various legal obligations. This bestows on lawyers a number of legal duties:

(1) To draft transactional contract documents for, among others, custody, investment, independent supervision and guarantee;

(2) To conduct legal due diligence review of, among others, the qualification of entities, validity of projects;

(3) To investigate the compliance and legality of the IDIP;

(4) To assist in drafting and reviewing the investment plan prospectus;

(5) To draft and review documents non-exclusive to the transactional documents, such as contracts for custody, investment, independent supervision and guarantee;

(6) To issue legal opinion regarding the above matters; and

(7) The design and compliance matters of an IDIP.