Takeover of RMB 58 Billion Non-performing Assets by Guangdong Yuecai Investment Holdings Limited from Guangdong Development Bank (2006)
Basic facts:
Project Background: In 2006, the investment group composed of Citigroup, CITIC Trust, National Grid, China Life Insurance Company Limited and other units made M&A of Guangdong Development Bank. As the pre-condition and key step of this M&A, the disposal program of non-performing assets of Guangdong Development Bank shall be firstly launched. According to the unified arrangement of the Guangdong Provincial Government, Guangdong Yuecai Investment Holdings Limited shall take over the non-performing assets of about RMB 58 billion from Guangdong Development Bank. Entrusted by Guangdong Yuecai Investment Holdings Limited, our law firm assigned a working team composed of dozen of lawyers including HE Shan, GONG Lei, WANG Shoujian, QIU Yajuan, DU Chengbiao, etc. to engage in the takeover of non-performing assets in this project.
Main legal services: The legal work coordination team was established by our law firm and other law firms for the takeover of non-performing assets, which prepared basic framework documents concerning the scope, requirements, key matters and procedures of the legal work related with the takeover and according to the features of the non-performing assets and the coordination team prepared Guiding Catalogue of Key Legal Review Points based on different types of non-performing assets according to the classification of non-performing assets based on the types of non-performing assets. To meet the time limit requirement, our law firm requires that all legal review of non-performing assets must be complete, orderly and complied with laws.
During the process of takeover, in addition to the on-site team of lawyers, our law firm has established a off-site, back-up research team composed of a number of senior lawyers, studying on the key and difficult legal issues found during the on-site work and proposing guidance. As the large scale of non-performing assets, long span of time for the generation and formation of non-performing assets, as well as great changes in related laws and regulations, the time is urgent and the task is very arduous for the on-site lawyers. Main legal work is related to the following aspects: Legitimacy of the occurrence and changes of principal debts (including loans, bankers’ acceptances bills, bills discounted); legitimacy of principal debts guarantee; the scope and change of debtors and secure parties; whether the limitation of action is expired; whether the limitation period of execution application is expired; and the legitimacy of transfer of guarantee, credit and debt. The involved laws mainly include commercial banking law, contract law, security law, civil law and other laws. After nearly two months of intense work, our law firm has completed the entrusted affair on schedule and in high quality. Relevant legal review work has been highly appreciated by Guangdong Yuecai Investment Holdings Limited.
Lawyers’ remarks:
The takeover of non-performing assets in this case is a major bank assets restructuring event after the non-performing asset stripping projects of Bank of China, Industrial & Commercial Bank of China, China Construction Bank and Agricultural Bank of China. However, the specific policies, judicial interpretations of the State Council and the Supreme Court on the restructuring of four state-owned banks are not applicable to the restructuring of non-performing assets of Guangdong Development Bank held by a provincial finance department. In the absence of the support of specialized national policies, laws and regulations, the current assets stripping work requires us to comply with the existing laws and regulations, requires us to make innovation within the guidance of national policies and judicial interpretation of the Supreme Court on debt restructuring and even requires us to have a detailed, comprehensive, in-depth understanding and mastery of the involved commercial banking law, contract law, security law, civil law and other laws, as well as relevant judicial interpretations. After the takeover is completed, Guangdong Yuecai Investment Holdings Limited chose to cooperate with our law firm for a number of significant assets clearing & recovering matters, which is inseparable from the preliminary quality legal services provided by our law firm.
