Charge-backs in Hong Kong: Conceptual, Legal, and Policy Issues

Abstract

This paper considers the conceptual, legal and policy issues relating to charge-backs over cash deposit in England and Hong Kong. I argue, first, the rejection of the conceptual impossibility doctrine in relation to the taking of charge-backs accords with sound policy rationales as well as business practice. Second, despite lenders being able to take charge-backs, the traditional triple cocktail structure, consisting of a flawed asset provision, a right of contractual set-off, and charge-back, adopted by lenders when it was not certain whether charge-backs were valid, still has its modern value. Third, I analyse from the lenders’ perspective the differences between taking mortgage-backs and charge-backs, and argue the former provide lenders with a number of benefits. Lastly, I re-examine the normative goals of registration of security interests, and applying the theory in the context of charge-backs, I argue why charge-backs should not be exempted from the statutory registration regime under the Companies Ordinance (Cap. 622).