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  • Keepwell deeds – an alternative to guarantees? 维好协议 – 担保的替代方案?

17 Mar 2022

Keepwell deeds – an alternative to guarantees? 维好协议 – 担保的替代方案?


What are keepwell deeds?

Keepwell structures have been widely used as a form of credit protection in recent years, especially in financing structures involving an offshore debtor with an ultimate parent incorporated in mainland China. Such structures would often involve an instrument known as a keepwell deed, which is executed by the onshore parent in favour of the financier. 

Terms of the keepwell deed can vary, but they typically involve the onshore parent undertaking to maintain a certain shareholding, a positive net worth and sufficient liquidity in the offshore debtor. It is also usual for the onshore parent to agree to make available to the offshore debtor sufficient funds to enable it to perform its payment obligations. 

While these terms create an obligation on the onshore parent to provide financial support to the offshore debtor in case it is unable to pay its debts, unlike corporate guarantees, keepwell deeds do not provide for a direct debt claim against the onshore parent for any due but unpaid obligation of the offshore debtor. In fact, there is usually an express provision in the keepwell deed that states neither the instrument itself nor anything contained therein constitutes a guarantee by the onshore parent. 

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Anna Kwong

Anna Kwong

T:  +852 2533 2854 M:  Email Anna | Vcard Office:  Hong Kong

Zoe Zhou

Zoe Zhou
Managing partner at Wei Tu Law Firm

T:  +86 20 8388 0590 M:  +86 137 6085 6526 Email Zoe | Vcard Office:  Guangzhou

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