Non Recourse Loan Agreement Template for Hong Kong

A Non Recourse Loan Agreement is a specialized financing contract that protects your personal or corporate assets by limiting the lender's recovery rights to specific collateral. Under Hong Kong law, this document creates a secured lending arrangement where the lender can only pursue designated assets if you default, providing crucial asset protection for borrowers in high-value transactions.

When do you need this document?

You need a Non Recourse Loan Agreement when undertaking project finance for infrastructure developments, real estate construction projects, or acquisition financing for income-producing properties. This document is essential for special purpose vehicles (SPVs) established to isolate project risks from parent company assets. It's commonly used in syndicated lending arrangements where multiple financial institutions participate in large-scale financing, and in asset-backed financing where the loan is secured by specific revenue-generating assets like commercial properties or equipment portfolios.

Key legal considerations

The agreement must clearly define the scope of recourse limitations and specify which assets serve as collateral security. You need comprehensive security documentation including mortgages, charges, and assignments that comply with Hong Kong's registration requirements. The document should address cash flow waterfall provisions, determining how asset revenues are distributed between debt service and other obligations. Default and enforcement procedures must be clearly outlined, including the lender's rights upon borrower insolvency. Consider including material adverse change clauses, financial covenants specific to the secured assets, and detailed representations and warranties about the collateral's condition and legal status.

Legal requirements in Hong Kong

Under the Money Lenders Ordinance, institutional lenders must ensure proper licensing and documentation standards for non-recourse arrangements. The Companies Ordinance requires registration of charges and security interests with the Companies Registry within specified timeframes to maintain priority rights. Real estate security must comply with the Conveyancing and Property Ordinance, including proper mortgage registration and stamping requirements. Anti-Money Laundering and Counter-Terrorist Financing Ordinance compliance is mandatory, requiring due diligence on beneficial ownership and transaction purposes. The agreement must include proper Hong Kong governing law and jurisdiction clauses, and security documents may require legal opinions on enforceability and priority ranking of various security interests.