TAIWAN Law and Practice Contributed by: Sarah Wu, Lee & Li Attorneys-at-Law
and assignee when the assignment is agreed upon by both parties. As such assignment is only between the parties to the assignment agreement and may not be known to the debtor, the Taiwan Civil Code provides that the assign- ment will not be effective against the debtor until the debtor has been notified of it by the assignor or assignee. Therefore, notification of assignment must be served to the debtor under Taiwanese law for an assignment of receiva- bles to be enforceable against the debtor. The debtor’s acknowledgement is not required but, in practice, many assignees would ask for such acknowledgement as evidence that the notice has been served. Intellectual Property Rights Security interests over intellectual property are commonly created by a pledge agreement, and intellectual property that can be pledged includes patents and copyrights. To create and perfect a pledge of intellectual property, the pledgor and the pledgee are required to first enter into a written pledge agreement that speci- fies the intellectual property that is to be pledged as security (eg, a specific patent along with its patent number). The parties should then register the pledged intellectual property with the com- petent authority in order to perfect the pledge. The registration typically requires the certificate awarded to the pledged intellectual property, the pledge agreement and any other documents evi- dencing the validity of the pledged intellectual property. The pledge is not enforceable against a bona fide third party until said registration is complete. Real Estate If the borrower or any of its subsidiaries (after the acquisition) owns valuable real estate (such as land and buildings), a first priority ranking real estate mortgage is usually preferred by the lend-
ers, as the value of the real estate is relatively steady compared to shares or intangible assets. To create a mortgage, the mortgagor and the mortgagee must enter into a written real estate agreement that identifies the object subject to the contemplated mortgage. The parties will then need to register the mortgage with the com- petent authority to perfect the mortgage, and such registration would be the material factor when determining the priority of multiple mort- gages over the same piece of real estate. Movable Assets Security over inventory and movable assets, such as machinery and equipment, may be cre- ated in the form of a chattel mortgage, in accord- ance with the Taiwan Personal Property Secured Transactions Act. The legal formality includes executing a written chattel mortgage agreement that identifies the name, type, brand, manufac- turer, number of pieces, value and location of the pledged equipment or machine. Although the chattel mortgage can be effective upon the execution of the chattel mortgage agreement, the mortgagee must still register the mortgage with the competent authority in order to claim the chattel mortgage against a bona fide third party, because the mortgagor is not required to deliver possession of the mortgaged chattels to the mortgagee. 5.2 Form Requirements In practice, there are no formality requirements for security agreements except for the following. Real Estate With respect to security over real estate, the mortgagor and the mortgagee are required to execute a Land Registry standard form and reg- ister the pledge with the Land Registry. Such form must be in Chinese and filed with the land office where the mortgaged property is located.
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