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A Hypothecation Agreement is a legal contract where you pledge an asset as security for a loan while keeping possession of it. It's commonly used in Kiwi banking and finance when borrowers want to secure funding without giving up their assets - think of it like putting up your house as collateral while still living in it.

Under NZ's Personal Property Securities Act, these agreements create a security interest that protects lenders. The asset owner can keep using their property, but if they default on the loan, the lender has the right to seize and sell it to recover their money. Banks and financial institutions often require hypothecation for business loans, trade finance, and securities trading.

Use a Hypothecation Agreement when you need to secure business funding but want to keep using your assets. This arrangement works particularly well for Kiwi businesses seeking trade finance, where inventory or equipment serves as collateral while remaining in active use. It's also valuable when setting up margin trading accounts with brokers or arranging working capital facilities with banks.

The agreement becomes essential during rapid business expansion, when you need quick access to capital without disrupting operations. NZ lenders often prefer hypothecation for seasonal businesses, manufacturers, and traders who need to maintain possession of their assets while accessing finance. It offers more flexibility than traditional security arrangements while still providing solid protection for both parties.

• Standard Security Hypothecation: Used for general business loans, this basic form covers fixed assets like equipment or property while allowing continued business use
• Trade Finance Hypothecation: Specifically designed for inventory and goods in transit, popular among importers and exporters in NZ
• Securities Trading Hypothecation: Used by brokers and investment firms, covering shares and financial instruments as collateral
• Floating Hypothecation: Covers changing asset pools like inventory or receivables, common in retail and manufacturing
• Limited Recourse Hypothecation: Restricts the lender's claims to specific assets only, protecting other business assets

• Banks and Financial Institutions: Act as primary lenders, drafting and enforcing agreements to secure their loans while allowing borrowers to keep using assets
• Business Owners: Use these agreements to access funding while maintaining operational control of their pledged assets
• Securities Brokers: Facilitate margin trading accounts and manage client collateral arrangements
• Corporate Lawyers: Draft and review agreements to ensure compliance with NZ securities law and protect client interests
• Trade Finance Companies: Provide import/export financing secured by inventory and receivables

• Asset Details: Gather complete descriptions, valuations, and ownership documents for all property being pledged as security
• Loan Terms: Document the loan amount, interest rates, repayment schedule, and specific conditions for default
• Party Information: Collect legal names, addresses, and registration details of all involved parties
• Usage Rights: Specify how the borrower can continue using the hypothecated assets during the loan term
• Compliance Check: Ensure alignment with NZ's Personal Property Securities Act and register the security interest on the PPSR
• Document Review: Use our platform to generate a compliant agreement that includes all mandatory elements

• Party Identification: Full legal names, addresses, and registration numbers of lender and borrower
• Asset Description: Detailed specification of hypothecated property, including serial numbers and locations
• Security Terms: Clear statement of the security interest being created under PPSA requirements
• Rights and Obligations: Usage conditions, maintenance requirements, and restrictions on asset disposal
• Default Provisions: Specific events triggering default and enforcement rights
• PPSR Details: Information required for registering the security interest on the Personal Property Securities Register
• Execution Block: Proper signing sections with witness requirements under NZ law

A Hypothecation Agreement differs significantly from an Asset Purchase Agreement in both purpose and effect. While both involve assets, they serve fundamentally different business needs in New Zealand's legal framework.

• Ownership Transfer: Hypothecation keeps assets with the borrower during loan terms, while an Asset Purchase Agreement permanently transfers ownership
• Purpose: Hypothecation secures financing while maintaining business operations; Asset Purchase Agreements facilitate complete business transactions
• Duration: Hypothecation agreements last until loan repayment; Asset Purchase Agreements complete a one-time transfer
• Rights: Under hypothecation, the borrower retains usage rights but can't sell; Asset Purchase transfers all rights to the buyer
• Legal Framework: Hypothecation falls under NZ's PPSA regulations, while Asset Purchase Agreements primarily follow contract and property law