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Title: Personal Property Secured Transactions Act CH
Amended Date: 2007-07-11
Category: Financial Supervisory Commission(金融監督管理委員會)
Chapter I General Principles
Article 1
(Legislative purpose)
This Act is specially enacted to accommodate the needs of industrial, commercial, and agricultural financing and the use of and benefit from personal property, and to safeguard the security of personal property secured transactions.
Article 2
(Definition of personal property secured transaction)
"Personal property secured transaction," as used in this Act, means a transaction in which, in accordance with this Act, a mortgage is created on personal property, or a conditional sale of such property is made, or possession of the property is taken under a trust receipt.
Article 3
(Scope of application)
Personal property secured transactions shall be subject to the provisions of this Act. Transactions not provided for herein shall be subject to the provisions of the Civil Code and other laws.
Article 4
(The subject property of personal property secured transactions)
Machinery, equipment, tools, raw materials, semi-finished products, finished products, vehicles, forestry, fishery, agricultural, and livestock products, livestock, powered vessels with total tonnages of less than 20 tons, and non-powered vessels with total tonnages of less than 50 tons may each be the subject property of a personal property secured transaction.
The designations of products under each of the categories of subject property in the preceding paragraph shall be determined by order of the Executive Yuan in consideration of actual needs and the nature of given transactions.
Article 4-1
(Effective with respect to work contributed to or thing joined or mixed with the subject property)
When work is contributed to, or something is joined or mixed with, the subject property of a personal property secured transaction, the effect of the personal property in securing a claim extends to the work contributed to or the thing joined or mixed with the subject property, to the extent of the original value.
Article 5
A written contract shall be entered into for a personal property secured transaction. Unless registered, a personal property secured transaction shall not be effective against a bona fide third party.
When a creditor takes possession of or retrieves the subject property of a personal property secured transaction in accordance with this Act, a bona fide lienholder's expenditures for repair or addition of work to the subject property of the personal property secured transaction, when the value of the personal property is increased thereby, shall be given precedence of satisfaction, to the extent of the increase in value, over any personal property secured rights that were previously established in accordance with this Act.
Article 6
The registration authority for personal property secured transactions shall be designated by the Executive Yuan.
Article 7
(Registration procedures)
The registration of a personal property secured transaction shall be filed by the parties to the contract, providing the contract or a duplicate thereof with the registration authority.
The registration authority shall make a notation of the date of receipt on the contract or a duplicate thereof, and shall retain the contract or a duplicate thereof on file for reference. It shall maintain a registry in which it registers the names of the individuals or entities that are parties to the contract and their respective domiciles, residences, or places of business, the date the contract was entered into, a description of the subject property, its price, the amount of the secured claim, and the date of termination.
The registry of the preceding paragraph shall be indexed, and parties to a contract or other third parties may at any time check or copy the contract registration information at the registration authority.
Article 7-1
When an application for registration of a personal property secured transaction does not comply with the regulatory requirements, the registration authority shall specify the reasons and order that the application be supplemented within a specific deadline. When no supplementation or insufficient supplementation has been made at the time of the deadline, the registration authority shall dismiss the application.
Article 8
The registration authority shall publish on a website or shall in another appropriate manner publicly announce the names of the individuals or entities that are parties to the contract, a description of the subject property, the amount of the secured claim, the date of contract formation, the date of termination, and any other necessary information.
Article 9
The effective period of registration of a personal property secured transaction shall be as stipulated by the contract; if not stipulated by the contract, the effective period shall be one year from the date of registration. Within 30 days prior to the end of that period, the creditor may apply for an extension of the registration period, which shall be effecttive from the day following the end of the original registration period.
The effective period of an extension of the registration period as stipulated in the preceding paragraph may not exceed one year. The registration authority shall handle the extension of the registration period in accordance with Articles 7 and 8, and notify the debtor. If the subject property is owned by a third party, the third party shall also be notified.
Article 10
After the secured claim has been satisfied, the creditor, at the written request of the debtor or an interested party, shall immediately issue evidentiary documentation. The debtor or the interested party may use the evidentiary documentation as the basis for cancellation of the registration with the registration authority.
A creditor that does not deliver the evidentiary documentation within 10 days from receiving a request under the preceding paragraph shall bear liability for damages.
When a creditor refuses to deliver the evidentiary documentation of paragraph 1, the debtor or interested party may use other means sufficient to demonstrate that the debt has been satisfied to cancel the registration with the registration authority.
Article 11
The registration authority shall collect an administrative fee for any registration, checking, copying, or issuance of certificates in relation to personal property secured transactions; the fee standards shall be set by the Executive Yuan.
Article 12
(Possessor's liability)
During the duration of the contract for the personal property secured transaction, the possessor of the personal property shall keep custody of or use the subject property with the due care of a good administrator.
Article 13
(Assumption of benefits and risks)
The benefits and risks of the subject property of a persoanl property secured transaction shall be assumed and borne by the possessor of the personal property, provided that if the contract stipulates otherwise, the contract stipulations shall govern.
Article 14
(Prohibition of waiver of rights)
Any contractual stipulation under which the debtor of a personal property secured transaction waives any right provided in this Act shall be void.
Chapter II Mortgage of Peraonal Property
Article 15
(Definition of mortgage of personal property)
"Mortgage of personal property" means a transaction in which mortgage rights over the personal property that secures a claim are created in favor of the mortgagee without transfer of possession of the property by the debtor or a third party, such that if the debtor fails to perform the contract, the mortgagee may take possession of the mortgaged property and may sell the property, and satisfaction of the mortgagee's claims from the sale proceeds shall have precedence over other claims.
Article 16
A personal property mortgage contract shall specify the following matters:
1. The names of the individuals or entities who are parties to the contract and their domiciles, residences, or places of business.
2. The amount of the claim being secured and the interest rate.
3. The name and quantity of the mortgaged property; the description of the specific serial number, identifying mark, or specification of the property, if there is any.
4. The manner of the debtor's or third party's possession of the mortgaged property and its location.
5. The means of exercise of mortgage rights and creditor's rights by the mortgagee in the event of the debtor's non-performance of his obligations under the contract.
6. A statement that the beneficiary of the insurance shall be the mortgagee if there is insurance,.
7. The date of entering into the mortgage contract.
When the claim that is secured by a personal property mortgage contract is a claim or claims incurred during a specific period of time, the mortgage contract shall specify the maximum amount of the claim secured.
Article 17
(Possession by the mortgagee and bona fide third party claims for damages)
When a debtor fails to perform the contract or the mortgaged property is relocated, sold, pledged, transferred, or otherwise disposed so as to prejudice the exercise of mortgage rights, the mortgagee may take possession of the mortgaged property.
When the debtor or third person of the preceding paragraph refuses to deliver the mortgaged property, the mortgagee may petition a court for provisional attachment. If the registered contract stipulates outright compulsory execution, the mortgagee may petition the court for compulsory execution pursuant to the contract.
When a third party has made a bona fide acquisition of the mortgaged property for consideration and the mortgagee subsequently takes possession of the mortgaged property from the third party, the third party then may claim damages from the debtor or the payee of the consideration.
Article 18
(Notification prior to taking possession; redemption of the mortgaged property)
A mortgagee that takes possession of mortgaged property in accordance with paragraph 1 of the preceding article shall give three days advance notice to the debtor or third party.
The notice of the preceding paragraph shall specify the reasons for taking possession of the mortgaged property, and may designate a deadline for contract performance. If the debtor has still failed to perform the contract by the deadline, the mortgagee may sell the mortgaged property in his possession and the debtor may not claim redemption of the mortgaged property thereafter.
When a mortgagee directly takes possession of the mortgaged property without giving the advance notice required by paragraph 1, then a debtor or a third party that performs the contract within a period of 10 days after the creditor takes possession, and bears the expenses incurred in taking possession, may redeem the mortgaged property; however, if there is a concern of perishment of the mortgaged property, significant depreciation in its value to the detriment of the rights of the mortgagee, or if the costs of its custody are prohibitive, the mortgagee may sell the property immediately after taking possession.
Article 19
(Sale or auction of mortgaged property)
Except under the circumstances in the paragraph 3 proviso of the preceding article, when a mortgagee sells the property in his possession, then within 30 days after taking possession, and following a period of not less than 5 days of public notice, the mortgagee shall conduct an on-site public auction of the mortgaged property, and shall notify the debtor or third party 10 days prior to the auction.
If the mortgaged property is severable, auction of the property shall cease when the proceeds of the sale are sufficient for satisfaction of the debt and related expenses. The creditor himself or his family members may participate in the auction and buy the mortgaged property.
Article 20
(Scope and order of priority of repayment)
The proceeds from the sale of mortgaged property shall first be used to offset expenses, followed by payment of interest and then by payment of the principal. If there is an excess, it shall be returned to the debtor; if there is a deficiency, the mortgagee may continue to demand full payment of the debt.
Article 21
The sale or auction of mortgaged property by a mortgagee pursuant to Articles 15, 18, or 19 shall be carried out under, in addition to the procedures set out in this Act,, Article 28 of the Enforcement Act of the Part of Obligations of the Civil Code.
Article 22
(Mortgagee's liability for unlawful possession or sale of mortgaged property)
When a mortgagee takes possession of or sells a mortgaged property other than in the manner prescribed in Articles 18, 19, and 21, the debtor may claim damages.
Article 23
(Prohibition of stipulations for immediate transfer of ownership)
Any contractual stipulation providing that ownership of the mortgaged property shall be transferred immediately to the mortgagee upon failure to satisfy the claim at its maturity shall be void.
Article 24
(Prohibition of pledge creation)
Mortgage rights on personal property may not be the subject of a pledge.
Article 25
(deleted)
Chapter III Conditional Sale
Article 26
(Definition of conditional sale)
"Conditional sale" means a transaction in which a buyer first takes possession of the subject property of the sale, under a stipulation that ownership of the subject property will pass to the buyer only upon the partial or full payment of the price of the property, or upon the fulfillment of a specific condition.
Article 27
A conditional sale contract shall specify the following matters:
1. The names of the individuals or entities who are parties to the contract and their domiciles, residences, or places of business.
2. The name, quantity, and price of the subject property; the description of the specific serial number, identifying mark, or specification of the property, if there is any.
3. A statement that the seller retains ownership of and makes use of the subject property in his possession.
4. The method of payment for the subject property of the sale.
5. The conditions under which the buyer obtains ownership of the subject property.
6. The method whereby the seller exercises rights in rem and creditor's rights if the buyer fails to perform the contract.
7. If there is insurance, a statement that the beneficiary of the insurance shall be the seller.
8. The date of entering into the conditional sale contract.
Article 28
If, before the transfer of ownership of the subject property to the buyer, the buyer has any of the following doings, to the detriment of the rights and interests of the seller, the seller may retrieve and take possession of the subject property:
1. Fails to pay the price of the property as stipulated.
2. Fails to fulfill the specific conditions as stipulated.
3. Sells, pledges, or otherwise disposes of the subject property.
If, when the seller retrieves and takes possession of the subject property of the preceding paragraph, there is significant depreciation in the value of the subject property, the seller may claim damages from the buyer.
Article 29
(Effect of resale of the subject property)
Within 10 days after the seller retrieves and takes possession of the subject property, the buyer may request in writing that the seller resell the subject property. Even in the absence of such a request from the buyer, the seller may resell the subject property within 30 days after retrieving and taking possession of the property.
If the seller retrieving and taking possession of the subject property does not receive a request from the buyer for its resale under the preceding paragraph, or if the seller does not resell the subject property within the 30-day period as stipulated in the preceding paragraph, the seller has no obligation to refund to the buyer the price already paid for the subject property, and the conditional sale contract shall cease to be effective.
Article 30
(Mutatis mutandis application of procedures for retrieval, possession, and resale of the subject property and of liability provisions)
The provisions of Chapter II, Article 17, paragraphs 2 and 3 and Articles 18 to 22 shall apply mutatis mutandis to the seller and buyer in a conditional sale.
Article 31
(Property that may not be the subject property of a conditional sale)
A personal property on which a mortgage has been created pursuant to this Act may not be the subject property of a conditional sale.
Any conditional sale contract that violates the provision of the preceding paragraph shall be void.
Chapter IV Possession in Trust
Article 32
(Definition of possession in trust)
"Possession in trust" means a transaction in which a trustor provides funds or credit to a trustee, and a claim is secured with ownership of the subject personal property originally placed in trust, while the trustee takes possession of and disposes the property under a trust receipt.
Article 33
A trust receipt shall specify the following matters:
1. The names of the individuals or entities who are parties to the trust receipt and their residences, domiciles, or places of business.
2. The amount of funds or credit that the trustor agrees to provide to the trustee.
3. The name, quantity, and price of the subject property, and the place where it is stored; the description of the specific serial number, identifying mark, or specification of the property, if there is any.
4. A statement that the trustor retains ownership of the subject property, and the manner in which the trustee takes possession of and disposes the subject property.
5. The method for repayment of the funds or credit provided, and a statement that if the trustee sells the subject property, the buyer shall deliver to the trustor a portion of the sale price equivalent to the amount listed under subparagraph 2.
6. The method by which the trustor will exercise rights in rem and creditor's rights if the trustee fails to perform the contract.
7. If there is insurance, a statement that the beneficiary of the insurance shall be the trustor.
8. The date of entering into the trust receipt.
Article 34
If the trustee has any of the following doings, the trustor may retrieve and take possession of the subject property:
1. Fails to satisfy the debt as stipulated.
2. Relocates the subject property without the trustor's consent.
3. Creates a pledge or a mortgage on the subject property.
4. Fails to dispose the subject property by the stipulated method.
Article 35
(Trustor's liability upon consenting to the sale of subject property)
If the trustor consents to a sale by the trustee of the subject property, whether or not registered, the trustor bears no liability as seller, nor any liability for debts incurred in the disposal of the property by the trustee.
The trustor may not assert ownership rights over the property that secures the claim against a buyer of the property, provided that this shall not apply to a buyer in a case in which there are stipulated restrictions on the disposition of the property or the method of satisfaction., of which the buyer has knowledge.
Article 36
(Property that may not be the subject property of possession in trust)
Personal property upon which a mortgage has been created in accordance with this Act may not be the subject property of possession in trust.
A trust receipt that violates the preceding paragraph shall be void.
Article 37
(Mutatis mutandis application of procedures for retrieval, possession, and resale of the subject property and of liability provisions)
The provisions of Chapter II, Article 17, paragraphs 2 and 3 and Articles 18 to 22 shall apply mutatis mutandis to the trustor and trustee in a possession in trust.
Chapter V (deleted)
Article 38
(deleted)
Article 39
(deleted)
Article 40
(deleted)
Chapter VI Supplementary Provisions
Article 41
(deleted)
Article 42
(Adoption of enforcement rules)
Enforcement rules for this Personal Property Secured Transactions Act will be adopted by the Executive Yuan.
Article 43
The date on which this Act shall come into force will be set by order.
Amendments to this Act shall come into force from the date of their promulgation.