萬國法律事務所

The Financial Supervisory Commission, Executive Yuan (FSC), recently proposed to amend the Chattel Mortgage Act to introduce the system of “floating charge”. The floating charge refers to a lien created by a security instrument against property owned by the debtor at the time of, as well as property acquired after, the execution of the instrument, such as inventory or accounts receivable.

Such floating charge system will provide companies with more options to offer security for loans and will create a business friendlier environment for business operations in Taiwan. The FSC was reportedly motivated by the Doing Business Report of the World Bank, wherein Taiwan obtained a low ranking with respect to the variety of means available for business to raise funds.

According to the proposed amendments to the Chattel Mortgage Act, a debtor or a third party may use, as collateral for the loan, all present and future property with specific kind, number and location. In the event that the debtor fails to repay the debt, the bank’s rights will be secured by the collateral as well as by the sums, accounts receivable, negotiable instruments and other substitution deriving from the collateral. Moreover, in order to evaluate the collateral, the bank is also entitled to inspect the collateral and to review the relevant documentation in connection therewith.