Tentative steps

Author: | Published: 1 Sep 2007
Can anyone see where Chinese regulation is headed?

China's new Property Rights Law supplements the legal regime governing security interests in China and includes new floating charge provisions. The new provisions appear particularly suitable for financing trade and manufacturing processes, but they will also give foreign companies taking floating charges in China greater certainty. The new law is effective October 1 2007.

A floating charge is a security interest created over all (or certain classes of) assets of a chargor, including currently owned and after-acquired collateral. On a crystallization event, such as default under a loan agreement or the appointment of a receiver, the charge becomes a fixed charge on the particular assets held by the chargor at that time. The advantage of the floating charge is that a chargor can sell or otherwise dispose of assets before crystallization as if those assets were free of any charge. In project...