HONG KONG SAR, CHINA Law and Practice Contributed by: Doos Choi, Pierre Dzakpasu, Ester Chow and Aditya Kurtakoti, Mayer Brown
5.10 Bank Licensing As mentioned in 2.1 Licensing and Regulatory Approval , there is no general requirement for a lender to obtain a licence or regulatory approval solely by reason of taking the benefit of security over assets located in Hong Kong. Lenders in a syndicate can (and, in fact, cus - tomarily do) appoint a trustee to (i) hold security on the syndicate’s behalf, (ii) enforce the syn - dicate’s rights under the loan documentation and (iii) apply any enforcement proceeds to the claims of all lenders in the syndicate. There is no requirement in Hong Kong for security to be granted directly to each individual lender in a syndicate. 6. Enforcement 6.1 Enforcement of Collateral by Non- Bank Secured Lenders The finance documents will set out the circum - stances in which a secured lender (whether bank or non-bank) can enforce its collateral. There will, in the usual way, be a suite of represen - tations and warranties, undertakings, financial covenants and events of default with an abil - ity by the lender to accelerate the loan upon a breach. There are no particular formalities which are required to make a demand under a loan or a guarantee, provided that the specified condi - tions for a demand have been met – eg, non- payment. There are two main ways in which security can be enforced: (i) exercising a power of sale, or (ii) foreclosure.
and standstill periods negotiated on a case-by- case basis: • restrictions on payments; • restrictions on enforcement action; • provisions regulating voting on an insolvency; and • provisions regulating amendments to the first- ranking and second-ranking documentation. A key area of focus for the second lien creditors is the timing of and their ability to enforce their security rights independently of the first lien and the extent to which they can influence the man - ner and terms of enforcement. 5.9 Cash Pooling and Hedging/Cash Management Obligations Cash pooling arrangements exist. Private credit lenders (and indeed bank lenders) will usually accept that the account bank with which oper - ating accounts are maintained will, by virtue of its status as account bank, have priority for any unpaid bank account fees, etc. Cash pool - ing in itself will not necessarily be problematic if, for example, security has been taken over all relevant accounts, including the main pool - ing account. Given the nature of these arrange - ments, security will be of a floating rather than fixed nature. Lenders will generally recognise the working capital efficiency and benefits of cash pooling and cash management arrangements. Treatment of hedging will vary from deal to deal, taking into account its commercial significance (for both the issuer and the lender) and the extent to which a hedging provider would be willing to provide hedging without the benefit of the trans - action security.
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