Strengthening Security Subordination Rules in the Civil Code Era
Based on the purpose of preventing financial risks,the PRC Civil Code and the Judicial Interpreta-tion of the Security System have established the dual rules of narrow-sense and broad-sense subordina-tion of obligations,limiting the scope of recognized independent guarantees to those specifically provid-ed by financial institutions.These provisions urge creditors to strictly scrutinize the validity of contracts to ensure compliance with financial policies.To ensure that finance serves the real economy,it is crucial to prevent creditors from obtaining excessive benefits through security transactions compared to the principal contract,and institutionally ensure that obligations incurred by guarantors could be recover-able from the debtor on the theoretical level.Based on a precise analysis of risk,the rules on the subor-dination of dispositions should be strengthened in cases of assignments of claims.There is no require-ment for perfection of accessory rights.
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