Notice of Guangzhou Intellectual Property Administration on Issuing the Measures for the Administration of Risk Compensation Mechanism for Intellectual Property Pledge Financing in Guangzhou
To all district-level intellectual property administrations and all units concerned,
In order to implement the Outline for Building a Powerful Country with Intellectual Property Rights (2021-2035) and the Notice of the State Council on Issuing the National Intellectual Property Protection and Use Plan for the 14th Five-Year Plan Period (GF [2021] No. 20), Guangzhou Intellectual Property Administration has made adjustments and optimization to the risk compensation mechanism for intellectual property pledge financing in Guangzhou, and subsequently formulated the Measures for the Administration of Risk Compensation Mechanism for Intellectual Property Pledge Financing in Guangzhou (hereinafter referred to as "these Measures"), which are hereby printed and issued to you. Please implement these Measures as required. If any issues arise during the implementation of these Measures, direct your inquiries to Guangzhou Intellectual Property Administration.
Guangzhou Intellectual Property Administration
July 12, 2023
Measures for the Administration of Risk Compensation Mechanism for Intellectual Property Pledge Financing in Guangzhou
Chapter I General Provisions
Article 1 These Measures are formulated to implement the Outline for Building a Powerful Country with Intellectual Property Rights (2021-2035) and the Notice of the State Council on Issuing the National Intellectual Property Protection and Use Plan for the 14th Five-Year Plan Period (GF [2021] No. 20), and to establish and standardize the risk compensation mechanism for intellectual property pledge financing in Guangzhou (hereinafter referred to as "risk compensation mechanism").
Article 2 The term "risk compensation" referred to herein means that for purposes of strengthening financial services related to intellectual property and promoting intellectual property pledge financing in Guangzhou, a dedicated fund not exceeding RMB 50 million will be allocated from the Guangzhou Intellectual Property Fund every year to guide cooperative banks to enhance their support in providing intellectual property pledge financing loans for micro, small, and medium-sized enterprises ("MSMEs"), and to compensate such banks for the principal loss of non-performing loans that comply with the provisions of these Measures.
Article 3 The term "intellectual property pledge financing" referred to herein means the financing activity in which intellectual property right holders pledge a single or any combination of intellectual property, such as patents, trademarks, geographical indications, or integrated circuit layout designs (the term "intellectual property" used hereunder refers in particular to the intellectual property of the aforementioned contents), to cooperative banks in order to obtain loans.
Article 4 The term "competent authority" referred to herein means Guangzhou Municipal Administration for Market Regulation (Intellectual Property Administration). The responsibilities of the competent authority are as follows:
(I) Take the lead in organizing the establishment of the risk compensation mechanism for intellectual property pledge financing, and determine the key industries to be supported by the risk compensation mechanism.
(II) Perform the operational supervision and management of the risk compensation mechanism, and take the lead in formulating relevant management measures.
(III) Apply for the annual budget for financial funds under the risk compensation mechanism and allocate the compensation fund according to the relevant procedures, and return the recovered liquidation and disposal funds to Guangzhou Municipal Finance Bureau.
(IV) Select and manage the entrusted management institution. The specific measures for such selection and management will be formulated separately.
(V) Review the application materials about compensation for cooperative banks' non-performing loans submitted by the entrusted management institution, approve the list of compensation for non-performing loans, and ensure the legal and compliant use of the compensation fund.
(VI) Instruct the entrusted management institution to solicit, manage, and withdraw cooperative banks.
Article 5 The term "entrusted management institution" referred to herein means the institution entrusted by the competent authority to provide routine management services of the risk compensation mechanism.
Article 6 The term "cooperative banks" referred to herein means commercial banks that possess intellectual property pledge financing products, voluntarily comply with the provisions of these Measures, and have been publicly solicited and selected by the entrusted management institution.
Article 7 The budgeting and utilization of the compensation fund under the risk compensation mechanism shall follow the principles of "inclusive development, moderate guidance, market operation, and limited security".
Chapter II Objects, Conditions and Criteria for Compensation
Article 8 The objects of risk compensation are cooperative banks.
Article 9 Any borrower applying these Measures must meet both of the following conditions:
(I) The borrower shall be any of the MSMEs that have been engaged in economic activities within the administrative divisions of Guangzhou for more than one year, and the criteria for classifying MSMEs shall comply with the provisions of the Notice of the Ministry of Industry and Information Technology, the National Bureau of Statistics, the National Development and Reform Commission and the Ministry of Finance on Issuing the Provisions on Criteria for Classifying Small and Medium-sized Enterprises.
(II) The borrower shall have no record of non-performing loans classified as Substandard, Doubtful, or Loss in the corporate credit reporting system of the People's Bank of China within three years.
Article 10 Any loan for which compensation is applied must meet all the following conditions:
(I) The loan shall comply with the provisions of Article 3 of these Measures regarding intellectual property pledge financing.
(II) The loan shall have been included in the project management under the risk compensation mechanism.
(III) The loan must be used for activities such as the borrower's technology research and development, transformation, industrialization, intellectual property development, or working capital turnover, rather than other purposes such as entrusted loans, acquisition loans, private loans, or investment in the capital market.
(IV) The loan shall have not benefited from other loan risk compensation policies of Guangzhou.
Article 11 The loan for which compensation is applied must have been overdue for more than 90 days, or have been classified as Substandard, Doubtful, or Loss by the People's Bank of China regarding non-performing loans.
Article 12 The amount and criteria for applying compensation are as follows:
(I) The total amount of annual compensation applied across Guangzhou shall not exceed RMB 50 million.
(II) The principal loss of each non-performing loan shall be compensated by 50%. For loans secured by a combination of intellectual property and other collateral, the loan principal accounted shall only include the amount of intellectual property pledge financing. For loans secured by other combinations, the loan contract must clearly specify the proportion of the loan amount assigned to the intellectual property pledge. No compensation will be granted if such loan amount is not specified.
(III) The compensation granted under the risk compensation mechanism shall only cover the part not exceeding RMB 10 million in any single loan to an MSME. For the same borrower's loans that are eligible under these Measures in one year, the cumulative loan amount shall not exceed RMB 20 million based on the time order of financing. The risk for any excessive loan amount shall be borne by the cooperative bank that grants the loan.
(IV) The risk compensation amount applied by a single cooperative bank shall not exceed 5% of the loan amount actually granted by the bank for financing projects that have been incorporated into the risk compensation pool for the current year.
Chapter III Working Procedure
Article 13 The entrusted management fees for the risk compensation mechanism consist of basic management fees and performance management fees, all of which are included in the budget of the competent authority. The specific fees will be defined in the entrusted management agreement signed by the entrusted management institution.
Article 14 The entrusted management institution is responsible for the routine operation and management of the risk compensation mechanism pursuant to these Measures and the entrusted management agreement. A risk compensation pool shall be established for the risk compensation mechanism, and all financing projects under these Measures shall be included in the pool for management in accordance with the following process:
(I) Application for inclusion. The borrower applies to the entrusted management institution for inclusion in the financing enterprise database under the risk compensation mechanism and for financing.
(II) Financing process. The entrusted management institution reviews the borrower's application materials and includes the borrower in the financing enterprise database under the risk compensation mechanism after approving such materials. The cooperative bank devises a credit plan for the borrower after completing the due diligence. The cooperative bank signs a pledge (loan) contract with the borrower, registers the pledge, and arranges for fund disbursement.
(III) Project management. Loan projects of cooperative banks shall be incorporated into the risk compensation pool for management.
Article 15 The entrusted management institution shall establish and standardize a post-loan management system, and work in collaboration with cooperative banks to enhance the post-loan management of loan projects.
Article 16 The risk compensation for non-performing loans under the risk compensation mechanism shall be applied in accordance with the following process:
(I) If any non-performing loan meets the compensation conditions, the cooperative bank shall submit an application for compensation to the entrusted management institution, which will review the application and forward it to the competent authority for approval. If the overdue rate of all projects in the risk compensation pool exceeds 5% (inclusive), the approval for new projects eligible for risk compensation will be temporarily suspended. The approval for risk compensation services will be resumed when the overdue rate of all projects drops below 5%. During the suspension period, for projects with outstanding principal and unpaid interest, the responsibilities of risk sharing shall be fulfilled as agreed in the cooperation agreement.
(II) The entrusted management institution, after reviewing the documents about projects whose risks have been resolved in the compensation period as required, shall submit such documents to the competent authority for approval.
(III) After the Guangzhou Intellectual Property Fund is allocated, the competent authority shall disburse the compensation fund to the cooperative bank eligible for compensation according to the approved amount.
(IV) After compensation is made under the risk compensation mechanism, the recovery entity shall carry out collateral disposal and debt recovery in accordance with the contract and relevant laws and regulations. After deducting the collateral disposal and recovery costs, the recovery entity shall return 50% of the recovered fund to the account of the competent authority, who will subsequently return the same to Guangzhou Municipal Finance Bureau.
(V) In the event of the borrower's bankruptcy or the termination of execution of effective legal documents such as civil judgments or arbitration awards for the borrower's civil lawsuits or arbitration requests, if the cooperative bank has followed the recovery procedure and fulfilled its recovery obligations according to the contract and relevant laws and regulations, the final loss of the compensation shall be written off after being applied by the cooperative bank, preliminarily reviewed by the entrusted management institution, and approved by the competent authority.
(VI) The documents required for the write-off application are as follows:
1. The write-off application made by the cooperative bank. The documents required for the write-off application include the application for the write-off of the compensation fund under the risk compensation mechanism for intellectual property pledge financing in Guangzhou, along with written materials such as the enterprise's basic information, loan disbursement and management details, loan compensation and recovery details, and information about the resulting loss of the compensation.
2. Civil judgments issued by courts or other legal documents that confirm the resulting loss.
Chapter IV Supervision and Management
Article 17 The competent authority, the entrusted management institution and other units shall establish an information communication mechanism to strengthen supervision and inspection. The competent authority may entrust accounting firms or other intermediaries to conduct special audits and inspections on the use and management of the compensation fund, with commission fees included in the budget of the competent authority.
Article 18 The entrusted management institution and cooperative banks shall enhance post-loan management and supervision of loan projects under the risk compensation mechanism. Cooperative banks shall submit quarterly post-loan supervision and management reports and their financing execution details to the entrusted management institution. The entrusted management institution shall submit loan statistics reports and post-loan supervision and management reports to the competent authority on a quarterly basis.
Article 19 Cooperative banks shall enhance the innovation of intellectual property pledge loan products and provide credit lines for intellectual property pledge financing.
Article 20 If a borrower is unable to repay the principal and interest of the loan on time, experiences seriously deteriorated operation without substantial overdue repayments, or is anticipated to be unable to repay the principal and interest of the loan upon maturity due to other material adverse effects, the cooperative bank shall promptly inform the entrusted management institution to jointly verify the borrower's repayment capability.
Article 21 If a cooperative bank has repetitively applied the Guangzhou risk compensation fund for the same non-performing loan, the competent authority shall order the bank to make corrections, recover the compensation fund, and disqualify the bank.
Article 22 If the entrusted management institution practices fraud, conceals the truth, colludes with others in cheating, or engages in similar misconduct, the competent authority shall disqualify the entrusted management institution and investigate its legal liabilities according to law.
Article 23 If the competent authority, the entrusted management institution or any of its employees defrauds, misappropriates, or misuses the compensation fund under the risk compensation mechanism, the pertinent entity and the individual concerned shall be punished as stipulated and investigated for legal liabilities according to law.
Chapter V Supplementary Provisions
Article 24 Upon the expiry of the former risk compensation fund for intellectual property pledge financing in Guangzhou, the existing projects in the pool shall be supported by these Measures.
Article 25 These Measures shall be implemented from the date of issuance and shall be valid until January 18, 2028. The Notice of Guangzhou Intellectual Property Administration on Issuing the Measures for the Administration of Risk Compensation Fund for Intellectual Property Pledge Financing in Guangzhou (Sui Zhi Gui Zi [2020] No. 1) shall be abolished simultaneously.
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