HONG KONG SAR, CHINA Law and Practice Contributed by: Doos Choi, Pierre Dzakpasu, Ester Chow and Aditya Kurtakoti, Mayer Brown
be notified in writing to the counterparty in the underlying agreement; (iv) the assignment must not purport to be by way of charge only; and (v) the intention of the assignor to transfer owner - ship rights to the assignee must be clear. If any of these requirements are not met, the assign - ment will be an equitable assignment. Intellectual Property Rights Security over intellectual property is usually taken by way of a fixed or floating charge, and depending on the type of intellectual property, may be registrable. As of January 2025, the fees for registering a security document at the Trade Marks Registry is HKD800, at the Patents Reg - istry is HKD325 and at the Designs Registry is HKD470. Shares Security over shares can be taken by way of a legal mortgage or equitable charge. Legal mort - gages entail legal title to the shares being trans - ferred to the mortgagee and as such, equitable charges are the more common form of security over shares. A number of ancillary documents will be required to be delivered in connection with the charge: (i) the original share certificate(s), (ii) pre-signed but undated instrument(s) of transfer and con - tract notes; (iii) pre-signed but undated letters of resignation from each of the directors of the subsidiary whose shares are being charged; (iv) pre-signed but undated board resolutions of the chargor approving the transfer of the subsidi - ary shares; and (v) letters of authorisation from each of the directors of the subsidiary to date the letters of resignation upon an enforcement sale. The articles of association of the subsidi - ary whose shares are being charged is also usu - ally amended to remove any transfer restrictions
that may hamper a lender’s enforcement of the security. To the extent the shares are listed in Hong Kong, the scope of charge will extend to the chargor’s claims against the Central Clearing and Settle - ment System and the broker’s account in which the shares are held. When taking security over listed shares, additional care should be taken to ensure the relevant disclosure and reporting requirements are complied with. 5.2 Floating Charges and/or Similar Security Interests Floating charges are recognised under Hong Kong law. Whether private credit lenders will insist on fixed versus floating charges will depend on the situ - ation. As for commercial bank loans, it is gener - ally recognised that a business will need suffi - cient flexibility to operate. Therefore, a nuanced approach is usually adopted, depending on the type of asset. For example, floating charges will be taken over operating accounts, but fixed charges will be taken over specific “control” accounts which have been established to underpin the lending structure. Floating charges can be expected for trading stock. Fixed charges will be taken over real estate and shares, etc. 5.3 Downstream, Upstream and Cross- Stream Guarantees Subject to the following, it is generally permis - sible for Hong Kong companies to give down - stream, upstream and cross-stream guarantees: • any restrictions under that company’s articles of association;
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