MACAU SAR, CHINA Law and Practice Contributed by: Frederico Rato, Pedro Cortés and Calvin Tinlop Chui, Lektou
5.6 Release of Typical Forms of Security The typical forms of security are released through the same requirements and formalities applicable to the perfection of the constitution of securities, which may require a deed of discharge and release, as well as cancellation of the respective registration with the competent public authorities, depending on the type of security and the assets granted in the security. 5.7 Rules Governing the Priority of Competing Security Interests The general rule governing the priority of competing security interests is the date of perfection of security (eg, registration of the security with the competent public authorities, when registration is required). Con- tractual prioritisations/subordination made within the legal limits are allowed in Macau and are enforceable between parties. However, for contractual subordina- tion provisions to fully survive the insolvency of a bor- rower, there must be sufficient funds to satisfy more senior creditors before the parties to the contractual subordination provisions. Otherwise, the priority of the creditors will be corrected in accordance with the legal priority. Privileged Credit Despite the above, the concept of privileged credit is set forth by the Macau Civil Code, which defines it as “the faculty that the law, considering the credit involved, grants to certain creditors, independently from registration, of being paid in detriment of other creditors”. Unlike secured credit (eg, through a mortgage or pledge), privileged credit does not need to be regis- tered, and it is the highest-ranked form of credit, hav- ing first priority over other obligations of the debtor. According to the Macau Civil Code, privileged credit is of two types: • general movable privileged credit, which covers the entire value of the assets when the assets are seized or frozen; and • special privileged credits, which covers the amount of determined assets. • The ranking of privileged movable credit is as fol- lows:
• the Macau SAR (ie, the State) has a privileged movable credit to secure direct and indirect taxes regarding the year in which the assets were frozen or seized and for the previous two years; • credit of the debtor related to medical treatment or of persons who are dependent on the debtor, related to a period of six months as from the request for payment; • credit for expenses strictly necessary to the exist- ence of the debtor or of persons who are depend- ent on the debtor as from the request for payment; • credit emerging from a labour contract or related to the termination or cessation of a labour contract in relation to a period of six months as from the request for payment; and • the funeral expenses of the debtor. As far as special privileged credit is concerned, under the Macau Civil Code, it is stated that: • the court fees spent in the common interest of the creditors to maintain, enforce or liquidate assets have preference over these assets; • the credit of a victim that covers civil liability has preference over the compensation owed by the insurer of such civil liability that the liable party has incurred; • the credit of the author of intellectual property emerging from a publishing contract has prefer- ence over the copies of the property existing in the power of the publisher; and • the real estate taxes and those payable for the transfer of assets have preference over, respective- ly, the income of these assets and these assets. Liquidation of Assets Whenever there is a liquidation of assets, the ranking of privileged assets is as follows: • credit related to court fees; • credit of the Macau SAR for taxes; • credit of a victim that implies civil liability; • credit for intellectual property; • credit of the debtor related to medical treatment or of persons who are dependent on the debtor, related to a period of six months as from the request for payment;
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