Hypothecation Agreement Template for Singapore

A Hypothecation Agreement lets borrowers pledge assets as collateral for loans while keeping possession of those assets. It's commonly used in Singapore's banking sector when businesses need working capital but want to continue using their pledged equipment, inventory, or securities during the loan period.

Under Singapore's legal framework, these agreements create a security interest without transferring ownership, making them different from mortgages or charges. Banks often require hypothecation for trade financing, and the agreement must clearly specify the pledged assets, loan terms, and the lender's rights if the borrower defaults. Local financial institutions typically register these agreements with ACRA to protect their interests.

Use a Hypothecation Agreement when you need financing but want to keep using your business assets. This arrangement works perfectly for Singapore businesses seeking trade finance while maintaining daily operations with their inventory, machinery, or securities as collateral.

The agreement becomes essential when dealing with banks that require security for loans without taking physical possession of assets. It's particularly valuable for manufacturers who need working capital against raw materials, traders securing credit against stock, or companies leveraging their investment portfolio. Singapore law requires proper documentation and ACRA registration to protect both parties' interests in these arrangements.

• Standard Bank Hypothecation: Used for securing loans against financial securities or deposits, common in Singapore's banking sector
• Trade Finance Hypothecation: Specifically designed for import-export businesses, covering inventory and receivables
• Stock Market Hypothecation: Used when pledging shares or securities while retaining trading rights
• Manufacturing Asset Hypothecation: Covers plant machinery and equipment while allowing continued business operations
• Floating Hypothecation: Applies to changing inventory or stock levels, popular among wholesale traders

• Banks and Financial Institutions: Act as lenders, drafting and enforcing Hypothecation Agreements to secure their loans against borrower assets
• Corporate Borrowers: Businesses pledging assets while maintaining operational use, especially in manufacturing and trading sectors
• Legal Counsel: Review and customize agreements to ensure compliance with Singapore's banking regulations and security laws
• Company Directors: Authorize and execute agreements on behalf of borrowing entities
• ACRA Officials: Handle registration and maintain records of hypothecated assets in Singapore's corporate registry

• Asset Details: List all items being hypothecated, including descriptions, values, and locations
• Loan Terms: Document the principal amount, interest rates, repayment schedule, and duration
• Company Information: Gather ACRA registration details, director authorizations, and corporate resolutions
• Asset Valuation: Obtain current market valuations from approved Singapore valuers
• Usage Rights: Specify how the borrower can continue using hypothecated assets
• Default Conditions: Define clear triggers and lender's enforcement rights under Singapore law
• Registration Requirements: Prepare documentation for ACRA filing of the security interest

• Parties Section: Full legal names and registration details of lender and borrower
• Asset Description: Detailed specification of hypothecated assets with values and locations
• Loan Terms: Principal amount, interest rates, repayment schedule, and duration
• Usage Rights: Terms allowing borrower's continued possession and use of assets
• Default Provisions: Consequences and lender's enforcement rights under Singapore law
• Representations: Borrower's authority to pledge assets and absence of prior encumbrances
• Governing Law: Explicit reference to Singapore jurisdiction and applicable regulations
• Execution Block: Proper signing format for corporate representatives

A Hypothecation Agreement differs significantly from an Asset Purchase Agreement in several key aspects under Singapore law. While both deal with assets, their fundamental purposes and effects are distinct.

• Ownership Transfer: Hypothecation keeps ownership with the borrower while creating a security interest; an Asset Purchase Agreement transfers full ownership to the buyer
• Asset Usage: Under hypothecation, the borrower continues using the assets; with purchase agreements, the buyer takes full control
• Duration: Hypothecation agreements are temporary, lasting until loan repayment; asset purchases are permanent transfers
• Legal Purpose: Hypothecation secures a loan while maintaining business operations; asset purchases facilitate complete business transitions
• Registration Requirements: Hypothecation requires ACRA registration as a security interest; asset purchases need transfer documentation and stamp duty payment