Trust concepts in China took another step forward under the Administration of Trust and Investment Corporations (TICs) Procedures promulgated by People's Bank of China (PBOC) on January 10 2001.
TICs are financial institutions established as limited liability companies or companies limited by shares under China's Company Law and the Procedures that are primarily engaged in trust business. With trusts being a relatively new concept in China, the Procedures explain in some detail how trusts are to be established. Notably, the Procedures make it clear that trust property does not form part of a TIC's assets and is not subject to liquidation procedures affecting the TIC itself or its assets.
A TIC requires a licence from the PBOC for its establishment and operations and needs to satisfy conditions generally considered to be in line with those required of financial institutions. However, there is a minimum registered capital requirement of Rmb 300 million ($36 million).
The business scope of TICs includes:
- holding of funds and other assets in trust for others;
- investment fund business and sponsorship of fund management companies;
- intermediary business such as financial consulting and management, restructuring and acquisition of corporate assets;
- distribution of entrusted sovereign bonds and corporate bonds;
- agency for the management, use and disposal of property;
- custodianship arrangements; and
- credit certifications and investigations.
Together with recent measures for regulating open end investment funds and a new Trust Law (effective October 1 2001), the Procedures are likely to play a substantial role in the much needed restructuring of and private investments into state-owned enterprises by, among other things, promoting better corporate governance.