On March 19, 2025, the Hong Kong Court of Final Appeal
("CFA") issued a landmark ruling on the enforceability of
"keepwell deeds" in Peking University Founder
Group Company Limited v. Nuoxi Capital Limited. As Hong
Kong's highest court, the CFA only hears questions of public
importance, making this a keenly anticipated decision for the legal
and investment community.
Unique to China, keepwell deeds arose from restrictions on a
Mainland parent's ability to guarantee the debts of its
offshore subsidiary. Beginning in June 2014, any such guarantee had
to be registered with the Mainland authorities, or risk being
unenforceable. As the registration process could be uncertain,
alternatives were sought. Keepwell deeds evolved as a type of
"guarantee-lite"; at its heart lay various undertakings
pursuant to which the Mainland parent agreed to ensure the
financial well-being of its offshore subsidiary.
