Non Recourse Loan Agreement for Hong Kong

Non Recourse Loan Agreement Template for Hong Kong

A Non-Recourse Loan Agreement under Hong Kong law is a specialized financing document where the lender's recourse is limited solely to specific collateral assets, without further recourse to the borrower's other assets or personal guarantees. This agreement, governed by Hong Kong law and regulation, includes detailed provisions on security interests, enforcement rights, and collateral management. It incorporates specific requirements under Hong Kong's Money Lenders Ordinance and relevant security registration requirements, while addressing the unique aspects of limited recourse financing in the Hong Kong legal framework.

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What is a Non Recourse Loan Agreement?

The Non-Recourse Loan Agreement is a specialized financing instrument used when lenders agree to look solely to specific collateral for loan repayment, without recourse to the borrower's other assets. This document type is commonly used in Hong Kong for project finance, real estate development, and asset-based financing transactions where the loan is secured by high-value assets generating their own cash flows. The agreement must comply with Hong Kong's legal framework, including the Money Lenders Ordinance, Companies Ordinance, and relevant security registration requirements. It includes comprehensive provisions for collateral description, security arrangements, enforcement procedures, and clearly defined limitations on recourse rights. The document is particularly important in structured finance transactions where risk isolation is crucial, and requires careful consideration of Hong Kong's security interest and enforcement regulations.

What sections should be included in a Non Recourse Loan Agreement?

1. Parties: Identification of the lender and borrower with full legal names and addresses

2. Background: Context of the loan transaction and general purpose

3. Definitions and Interpretation: Defined terms, interpretation rules, and construction principles

4. The Facility: Key terms of the loan including amount, purpose, and availability period

5. Interest: Interest rate, calculation method, payment dates, and default interest provisions

6. Repayment: Repayment schedule, prepayment terms, and payment mechanics

7. Security: Description of collateral and security arrangements

8. Non-Recourse Provision: Clear statement limiting recourse to the specified collateral only

9. Conditions Precedent: Conditions that must be satisfied before loan drawdown

10. Representations and Warranties: Borrower's statements regarding its status and the collateral

11. Covenants: Ongoing obligations regarding the collateral and borrower conduct

12. Events of Default: Circumstances constituting default and enforcement rights

13. Enforcement: Rights and procedures for enforcing against the collateral

14. Costs and Expenses: Allocation of transaction costs and enforcement expenses

15. Notices: Communication methods and contact details

16. General Provisions: Boilerplate clauses including governing law and jurisdiction

What sections are optional to include in a Non Recourse Loan Agreement?

1. Security Trustee Provisions: Required when there are multiple lenders and a security trustee structure

2. Insurance: Detailed insurance requirements when collateral requires specific insurance coverage

3. Additional Collateral Rights: Used when there are unique features of the collateral requiring special provisions

4. Tax Gross-Up: Include when tax implications require specific treatment of payments

5. Currency Provisions: Required when loan and repayment may involve multiple currencies

6. Syndication Rights: Include if the lender may want to syndicate the loan

7. Regulatory Compliance: Special provisions required for regulated borrowers or collateral

8. Market Disruption: Include for floating rate loans to address market disruption events

What schedules should be included in a Non Recourse Loan Agreement?

1. Schedule 1 - Collateral Description: Detailed description of the assets serving as collateral

2. Schedule 2 - Form of Drawdown Request: Template for borrower to request loan disbursement

3. Schedule 3 - Conditions Precedent Documents: List of required documents and conditions

4. Schedule 4 - Repayment Schedule: Detailed payment dates and amounts if term loan

5. Schedule 5 - Form of Security Documents: Forms of security agreements and filings

6. Schedule 6 - Form of Compliance Certificate: Template for periodic compliance certification

7. Appendix A - Calculation of Interest: Detailed interest calculation methodology

8. Appendix B - Enforcement Procedures: Specific procedures for collateral enforcement

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Hong Kong

Publisher

Genie AI

Document Type

Promissory Note

Sector

Banking

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Real Estate

Project Finance

Infrastructure

Mining

Energy

Asset Finance

Commercial Property

Construction

Renewable Energy

Shipping

Relevant Teams

Legal

Finance

Risk Management

Treasury

Compliance

Credit

Project Finance

Corporate Finance

Investment

Asset Management

Operations

Property Management

Relevant Roles

Chief Financial Officer

Finance Director

Legal Counsel

Risk Manager

Treasury Manager

Credit Officer

Loan Officer

Compliance Officer

Project Finance Manager

Asset Manager

Property Manager

Investment Director

Corporate Finance Manager

Transaction Manager

Security Trustee

Portfolio Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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