References & Cases

A Hong Kong company (hereinafter referred to as the " Company ") has been supplying ordinary and high-strength steel to a German supplier (hereinafter referred to as " OBI ") for a long time. In 2015, the Company and OBI reached a set of agreements on the supply and payment of goods by mutual consent, pursuant to which the Company would continue to supply goods to OBI, and OBI would defer the payment of goods for a period of time subject to a certain amount of fund-occupation expenses paid by OBI with a limit of EUR5 million, and that upon expiry of the agreement, OBI should pay the outstanding accounts to the Company in full. In order to guarantee the payment of the above-mentioned goods, OBI was requested to mortgage its self-owned land and registered the land mortgage in the German Land Register in favor of the Company in the first position. On the one hand, the Company obtained exclusive supply rights from OBI and minimised the cost of capital utilisation of accounts receivable; on the other, OBI guaranteed preferential purchase prices, which was a consensual and win-win situation for both parties.

The aforesaid agreement arrangement proceeded smoothly until early 2020 and OBI wished to settle the aforesaid accounts payable in advance due to its funding arrangement. Our team was instructed by the Company to discharge the registration of the aforesaid land mortgage on the premise of ensuring the smooth recovery of the accounts receivable.

The team first assisted the client in signing a framework agreement with OBI in relation to the procurement requirements after the termination of the agreement mentioned above (including the minimum purchase volume and purchase amount, liquidated damages for failure to meet the target, etc.), as well as assisting the client in signing an agreement on the settlement of accounts receivable and the release of the registration of the land mortgage, and issued the relevant documents in accordance with the German law.

The key factor of ensuring the successful collection of receivables by clients is the security right in land. In Germany, all matters involving land must be notarised by a local attorney in accordance with Section 29 of the German Land Register Ordinance (Grundbuchordnung). The Company duly appointed and authorized a German notary selected by our team and created an Escortaccount in the name of the German notary, which is managed by the German notary, the Company and OBI. After OBI has made the payment and the above-mentioned amount has been confirmed to be received by OBI, the expressly authorised German notary was allowed to apply to the German Land Registry for the removal of the Company's first mortgage. On this basis, the third party was approved to be registered as the new mortgagee by the Company.

Moreover, as cross-border transactions are involved, various official certifications were required. However, due to the Covid-19 epidemic, the directors of the company were unable to travel to Hong Kong for notarisation. In order to overcome this obstacle, our team rearranged the notarisation procedure: firstly, the parent company of the Company appointed a local notary (Danyang, Jiangsu Province) and completed the face-to-face signing at the local notary office; afterwards, the above notarised transaction contract was double-certified (Legalization) in accordance with German law. During the epidemic period, the process of completing the double legalisation through ordinary procedures was slow and could take up to one month or more. In order to seize the time, our team arranged a person to go to the Foreign Affairs Office for authentication, and then went to the German Consulate in China for German Consulate authentication; finally, entrusted Hong Kong notary lawyers to notarize the text of the contract signed by the directors, the Company’s existence (notarised its latest company register), the authorized person, etc.

After the notarization, under the coordination of our team, the German notary attorney communicated with the German Land Registry in advance on the release of the mortgage; OBI arranged the payment to the collection account; and after the German attorney confirmed that the payment was in the account confirmed with the Company to apply for the release of the land mortgage, which was finally released from the registration in November 2020.

Through the formulation of a seamless transaction process and the signing of legal documents to escort the transaction, and ultimately achieved the client's business objectives, which required a team of lawyers who understand the different cultures, trading habits, and similarities and differences in the legal systems of China and Germany, and through the full co-operation of lawyers both inside and outside the country in order to be successfully completed. At the same time, the Company upgraded its supplier status in OBI, locking in the minimum purchase volume for 5 years from the date of signing the supply contract, and OBI obtained favorable purchase prices for the next 5 years.