HONG KONG SAR, CHINA Law and Practice Contributed by: Doos Choi, Pierre Dzakpasu, Ester Chow and Aditya Kurtakoti, Mayer Brown
by virtue of (and subject to the same reserva - tion as) the PRC being party to the New York Convention. 6.4 A Foreign Private Credit Lender’s Ability to Enforce Its Rights There are no restrictions of a generic nature on a foreign private credit lender’s ability to enforce its rights under a loan or security agreement. 6.5 Timing and Cost of Enforcement Almost all security enforcement processes by a secured creditor will entail the appointment of a receiver. Such appointment process need not be very lengthy and certain lenders may well have a history of appointing certain receivers which can be expected to expedite the process. Assuming the enforcement is not contested, the most time-consuming aspect to enforcement is the process of ensuring that the duty to obtain a proper price is discharged. Typically, this will be achieved by running a public auction pro - cess which can take several months or longer, depending on the prevailing economic condi - tions, the business or asset concerned, and market interest. The costs and expenses of a restructuring will usually include lender fees, receiver fees, legal fees and advisory fees. Depending on the situ - ation, there may be other fees and expenses related to the restructuring (eg, broker fees for marketing a property). 6.6 Practical Considerations/Limitations on Enforcement For private credit investments in Asia, one of the first considerations will be the robustness and predictability of the judicial systems regu - lating the obligors and the transaction security. A well-structured investment will have already
taken this into consideration, particularly when formulating the collateral package, but it will not always be possible to avoid jurisdictional “hot - spots” where any enforcement action is likely to be contested and can be expected to take an extensive amount of time to resolve (without much visibility on the likely outcome). Taking a step back, in terms of a more generic assessment, there will be two main considera - tions for a secured creditor (with a level of ten - sion with each other). Firstly, the time it will take to realise value and secondly ensuring that the enforcement action is not vulnerable to chal - lenge – in Hong Kong, this invariably goes to a secured creditor’s duty to obtain a proper price on any enforcement sale. Where a willing buyer has already been secured, a consensual enforcement sale can be imple - mented fairly quickly. Against that, the lender will need to be comfortable that it has discharged its duty to obtain a proper price. Whilst it is not always necessarily the case, generally speak - ing, the best way to demonstrate that such duty has been discharged will be to run a marketing process and invite bids. Of course, even such limited processes will take time (and money) and the relative benefits must be weighed up on a case-by-case basis. 6.7 Claims Against Secured Lenders Post-Enforcement As discussed in 6.1 Enforcement of Collateral by Non-Bank Secured Lenders , in the event of an enforcement of security over their collateral, the secured creditor will normally enforce its security by appointing a receiver to get in and enforce the security (by exercising the power of sale and applying the proceeds to the settlement of the secured debt). In such circumstances, the secured lender does not come into possession
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