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A Security Agreement creates a legal pledge between a borrower and lender in Hong Kong, allowing the lender to claim specific assets if the borrower defaults on their obligations. These agreements commonly cover business assets like equipment, inventory, or accounts receivable under Hong Kong's Personal Property Securities laws.

Companies typically use Security Agreements alongside loan documents to protect lenders and secure better financing terms. The agreement must identify the secured assets clearly, outline the payment terms, and follow local registration requirements through the Companies Registry to be legally enforceable in Hong Kong courts.

Use a Security Agreement when lending money or extending credit and need protection beyond a basic promise to repay. This legal tool proves especially valuable for Hong Kong businesses financing equipment purchases, inventory expansion, or working capital needs where specific assets serve as collateral.

The agreement becomes essential before disbursing significant loans, particularly when dealing with new business relationships or higher-risk transactions. Many banks and financial institutions in Hong Kong require these agreements as standard procedure for secured lending, making them a crucial step in accessing better interest rates and more favorable loan terms.

• Personal Loan Contract Between Friends: Secures informal lending with basic asset pledges, ideal for smaller transactions
• Equipment Sales Agreement: Focuses on specific machinery or equipment as collateral, common in manufacturing
• Commercial Sales Contract: Covers inventory and trade goods as security, typically used in retail and wholesale
• Convertible Loan Agreement: Combines debt security with equity conversion rights, popular in startup funding

• Banks and Financial Institutions: Draft and require Security Agreements as lenders to protect their interests when providing business loans or credit facilities
• Corporate Borrowers: Sign these agreements to secure better lending terms and access larger credit amounts by pledging company assets
• Legal Counsel: Review and customize agreements to ensure compliance with Hong Kong security laws and proper registration requirements
• Company Directors: Execute agreements on behalf of their organizations and ensure proper asset disclosure
• Security Trustees: Manage secured assets on behalf of multiple lenders in syndicated loan arrangements

• Asset Details: List all collateral with clear descriptions, serial numbers, and locations
• Party Information: Gather legal names, registration numbers, and addresses of all involved parties
• Loan Terms: Document the principal amount, interest rates, payment schedule, and default conditions
• Existing Liens: Check the Companies Registry for any prior security interests on the assets
• Registration Requirements: Prepare necessary forms for registering the security interest within 21 days
• Execution Plan: Identify authorized signatories and arrange for proper witnessing of signatures

• Parties Section: Full legal names and addresses of both secured party and debtor
• Collateral Description: Detailed identification of secured assets, including locations and distinguishing features
• Security Interest: Clear statement creating the charge over specified assets
• Payment Terms: Loan amount, interest rates, repayment schedule, and default triggers
• Enforcement Rights: Powers of the secured party upon default, including asset seizure procedures
• Registration Clause: Acknowledgment of Hong Kong registration requirements and timeframes
• Governing Law: Explicit statement choosing Hong Kong law as governing jurisdiction

A Security Agreement is often confused with an Asset Purchase Agreement, but they serve distinct purposes in Hong Kong's business landscape. While both documents deal with assets, their fundamental functions and legal implications differ significantly.

• Primary Purpose: Security Agreements create a lender's right over assets as loan collateral, while Asset Purchase Agreements transfer ownership of assets from seller to buyer
• Duration: Security Agreements remain active until loan repayment, whereas Asset Purchase Agreements complete the transaction once executed
• Asset Control: Under Security Agreements, borrowers retain possession and use of assets unless default occurs; Asset Purchase Agreements transfer full control immediately
• Registration Requirements: Security Agreements must be registered with Hong Kong's Companies Registry within 21 days; Asset Purchase Agreements typically don't require registration