A Debt Clearance Letter is a crucial document used in Hong Kong's business and financial landscape when a debt has been fully settled and the creditor wishes to provide formal confirmation of the debt's discharge. This document is particularly important in Hong Kong's dynamic financial environment, where clear documentation of debt settlement is essential for business certainty. The letter typically includes specific details about the original debt, payment confirmation, and explicit release language. It serves multiple purposes: providing the debtor with proof that the debt has been cleared, protecting the creditor from claims of failing to acknowledge payment, and creating a clear audit trail for accounting and legal purposes. The document must comply with Hong Kong's legal requirements, particularly the Limitation Ordinance and Contract law principles, and can be used in various contexts from simple business loans to complex corporate debt arrangements.
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1. Letter Header: Formal business letter header including date, sender's details, recipient's details, and reference number
2. Debt Reference: Clear identification of the original debt(s), including date, amount, and any relevant contract or loan agreement numbers
3. Settlement Confirmation: Statement confirming the amount paid and that it constitutes full settlement of the debt
4. Release Statement: Formal declaration that the debtor is released from all obligations related to the specified debt
5. Legal Effect: Statement confirming this letter serves as full and final settlement of the debt
6. Authorization: Confirmation that the letter is signed by an authorized representative of the creditor
7. Signature Block: Space for signature, name, and title of the authorized signatory
1. Partial Settlement Terms: Used when the clearance relates to only part of a larger debt or specific components of multiple debts
2. Conditional Release: Include when the release is subject to certain conditions being met (e.g., final payment clearance)
3. Confidentiality Clause: Include when parties wish to keep the settlement terms confidential
4. Non-Admission of Liability: Used when settlement is reached without admission of liability by either party
5. Return of Security: Include when there are security documents or collateral to be returned
6. Tax Implications: Include when there are specific tax considerations that need to be acknowledged
1. Payment History Schedule: Detailed breakdown of payments made against the debt
2. Original Debt Documentation: Copies or references to the original loan agreements or debt instruments
3. Security Release Documents: If applicable, documents releasing any security or collateral
4. Multiple Debt Schedule: When the clearance covers multiple debts or facilities, detailed listing of all debts being cleared
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