Primary Relationship in Entrusted Financing and the Requirements for the Fulfillment of Fiduciary Duty

As a typical commercial relationship, the entrusted financing covers multiple financial fields. Under the principle of “separate operation and management”, in judicial practice, there exists a line of thought that the legal nature and application of the entrusted financing is determined merely by name or by following the dominant factors. However, this is likely to cause an absence and displacement of the applicable law. Also, as the entrusted financing is different from the general civil entrustment, it is inappropriate for the court to directly apply by analogy the provisions on “commission contract” in the Civil Code of the People’s Republic of China; otherwise, it is easy to cause the dilemma of “cutting the feet to fit the shoes” in applicable law. The entrusted financing can be divided into trust financing and general entrusted financing, both of which are based on the entrustors’ trust of fiduciaries, and the trustees enjoy the right of control that may have an impact on the interests of the entrustors or the beneficiary. Therefore, entrusted financing should be regarded as a kind of fiduciary relationship, and it is inappropriate to define it as a general civil entrustment or a generalized fiduciary relationship. Taking the fiduciary relationship as the basis, the trustees assume fiduciary duty, which can strengthen the protection of investment rights and interests. With the interpretative theory, the principle of good faith can be used to supplement the interpretation and the approach of “substance over form” can be adopted to realize the application of corresponding fiduciary rules in the Trust Law of the People’s Republic of China in individual cases, so as to improve the judicial adjudication of entrusted financing.