HONG KONG Law and Practice Contributed by: Vincent Sum and Sylvia Leung, Mayer Brown
action parties, such as servicers or the issu - ing entity itself, subject to any legal/regulatory/ operational limits. 2.8 Security Trustees/Agents The security trustee/agent holds the collateral of the transaction – eg, security created over the issuer’s assets (eg, receivables, bank accounts and other corporate assets) for the benefits of the bond-/note-holders. Their responsibilities include ensuring the secu - rity interests are properly validated and main - tained, usually also acting as account banks managing or safeguarding the collateral (eg, shares or cash in a custodian bank account), taking enforcement actions in defaults, and act - ing on the collective instructions of the bond-/ note-holders (subject to be first being secured/ indemnified/pre-funded as to any costs or liabil - ity that arise). The roles of security trustees or agents are typi - cally assumed by commercial banks and pro - fessional trust companies. Note that the trustee and security trustee/agent are usually the same institution with the capability to provide one-stop services. 3. Documentation 3.1 Bankruptcy-Remote Transfer of Financial Assets The typical primary documentation used to effect bankruptcy-remote transfers of financial assets to the SPE includes sale and purchase agree - ments, legal assignments and other applicable security agreements, trust deeds, and servicing agreements. These documents legally formalise the sale of assets from the originator to the SPE, ensuring they are legally separated from the
originator’s other assets. This separation is vital for maintaining the SPE’s bankruptcy remote - ness, protecting the assets from being claimed by creditors of the originator in the event of the originator’s bankruptcy. The trust deed may also include provisions to prevent actions that could lead to the SPE’s winding-up, further enhancing its bankruptcy remoteness. For example, an assignment of receivables in a securitisation is usually effected in the form of a sale and purchase agreement entered between the originator and the issuer. The principal subject matters in a sale agree - ment include the following: • the transfer of the originator’s rights and obligations in respect of the receivables to the issuer; • the consideration payable by the issuer for the transfer; • the conditions that must be satisfied before the transfer may be effectuated and before the consideration becomes payable; • the consequences for non-compliance with conditions; and • the representations and warranties made by Typical warranties made by the originator include its capacity and authority to enter into the sale transaction. The originator will also pro - vide warranties as to its legal title to the subject receivables and its compliance with any eligibil - ity criteria relating to the nature or quality of the receivables, including that the originator is not subject to any winding-up, dissolution or bank - ruptcy proceedings or other analogous actions, and that there are no circumstances or legal the originator or the issuer. 3.2 Principal Warranties
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