Loan agreements on PartnerVine

Partnervine sells four automated loan agreements under Swiss law. The agreements are as follows:

  1. Loan Agreement. By Meyerlustenberger Lachenal, this loan agreement can be used by both companies and individuals.
  2. Inter-Company Loan Agreement. By PwC Switzerland (“PwC”), this loan agreement is for use between companies in a group.
  3. Inter-Company Subordinated Loan Agreement. By PwC, this loan agreement is for use between companies in a group, in a situation where the loan should be subordinated to other creditors’ claims.
  4. Inter-Company Secured Loan Agreement. By PwC, this loan agreement is for use between companies in a group, in a situation where the loan should be secured.

MLL’s Loan Agreement

MLL’s loan agreement is available in English, German (Darlehensvertrag), and French (Contrat de prêt). It allows you to create agreements between legal persons (companies) as well as natural persons (individuals). It is governed by article 312 et seq. of the Swiss Code of Obligations.

The questionnaire allows the user to choose between different currencies, including Swiss Francs, Euros, and US Dollars, provides options for the terms governing the repayment of the principal and interest, the term of the loan, securities, early repayment options, and the governing jurisdiction of the agreement.

In MLL’s loan agreement, you can enter information about the following terms:

  • Details of the parties;
  • Details regarding the loan (i.e. amount, currency, payment, etc.);
  • Details regarding the interest (i.e. interest rate, interest period, payment, compound interest, etc.);
  • Term of the loan;
  • Early repayment options;
  • Securities; and
  • Jurisdiction.

The general loan agreement takes into account that loans between parties who are not at arm’s length may trigger special tax considerations under Swiss law. The agreement questionnaire refers to circulars issued by the Swiss Federal Tax Administration that may apply to these cases. Although there is guidance in the questionnaire, Partnervine recommends that you obtain independent tax advice before entering into a loan agreement between related parties.

PwC’s Inter-Company Loan Agreement

The inter-company loan agreement is designed for loans between two group companies. This flexible and general agreement is designed solely for use as an intra-group financing mechanism. As a result, it comes with a standard clause that triggers a default if the borrowing company ceases to be a member of the group.

The Agreement allows you to enter information about the following terms:

  • Purpose and background;
  • Term and termination;
  • Drawing and repayment;
  • Interest rate and mechanics;
  • Granting of sub-loans;
  • Borrower covenants;
  • Set-off and assignment;
  • Jurisdiction and arbitration.

Because this agreement is intended solely as a means of intra-group financing it is not appropriate for arm’s length, third-party agreements. It is, however, suitable for cross-border transactions in which both parties agree to be bound by Swiss law.

PwC's Inter-Company Subordinated Loan Agreement

The inter-company subordinated loan agreement is a loan between two group companies intended to be subordinated to the claims of existing or future creditors.

Loans are typically subordinated for tax planning purposes, to realize financial strategy goals, or to stabilize a borrower’s financial position if it becomes overextended or overindebted. In addition to applying to the principal on the loan, subordination can also apply to the interest payments.

The parties to a subordinated loan agreement must specify a repayment date for the loan. If the subordination still applies at that time (if the borrower still faces other claims with higher precedent than the subordinated loan), the repayment date is automatically deferred.

The questionnaire will ask you to enter information about the following terms:

  • Purpose and background;
  • Amount of the loan;
  • Terms of drawing;
  • Interest rate and mechanics;
  • Scope and modalities of the subordination;
  • Repayment terms and events of default;
  • Borrower covenants;
  • Assignment;
  • Provisions relating to notices; and
  • Jurisdiction and arbitration.

Additionally, you should note that compliance with the arm’s length principle may require the parties to obtain corporate approvals or tax review and assessment. Finally, the borrower may need to disclose the subordination in their balance sheet to comply with accountancy requirements and group treasury policy.

The automated document allows you to select additional covenants that will bind the borrower, including that the borrower:

  • Inform Lender of any major business changes relevant to the performance of this agreement.
  • Inform Lender on request of all material changes to its accounts.
  • Provide Lender with copies of its financial statements.
  • Maintain minimum net debt/EBITDA ratio (to be defined).
  • Not sell, transfer or otherwise dispose of all or any substantial part of its assets without Lender’s prior written consent until repayment in full of the loan and any accrued interest.

PwC's Inter-Company Secured Loan Agreement

The inter-company secured loan agreement is a loan between two group companies secured by property referred to in a stand-alone security document provided separately by the borrower.

Both non-interest-bearing and interest-bearing loans may be specified and the loan may be of a fixed or unfixed term.

You’ll be asked to enter information about the following terms of the loan:

  • Purpose and background;
  • Term and termination;
  • Drawing and repayment;
  • Interest rate and mechanics;
  • Nature of the security;
  • Granting of sub-loans;
  • Borrower covenants;
  • Set-off and assignment;
  • Provisions relating to notices; and
  • Jurisdiction and arbitration.

How does the software work?

For both PwC and MLL, you buy 90 days access to an automated document. An automated document is software that takes you through a guided interview. Your answers to the interview questions create a draft of an agreement. The questions serve as a checklist of issues to create the agreement, so you’ll be more likely to address issues you may not be considering. The checklist has been created by the law firm that prepared the product, so you’re getting access to the same resources a member of that law firm would use to create the agreement. What’s more, the questionnaire is built to insert repetitive items identically throughout the agreement, so there is less chance of error if you’re doing something like replacing the names of parties. After you’ve gone through the questionnaire, you’ll be shown what the draft of the agreement will look like, and then be able to make changes in the software, or after you’ve downloaded the agreement in Microsoft Word. For both PwC and MLL, you can use the questionnaire as many times as you’d like and download as many versions as you’d like during the 90 days you have access. It is quick and easy to repurchase access as well. When you purchase a product from either PwC or MLL, Coupa's software powers the product.

User experience

Each loan agreement leads a user through a user-friendly interview format, or questionnaire. The interview leads you through questions that involve ‘nested’ decision trees, so your answer opens up further questions and information based on your choices. The software saves you time by steering you through questions relevant to your responses, and mitigates the risk of errors by leading you through a checklist of issues. After going through the questionnaire, the software generates a contract, which can be downloaded or sent to you by email in Word or pdf.

Savings

PwC has estimated the time and money you’ll save with the “Relative Advantage Calculator” listed on their product pages. Taking the Inter-Company Loan Agreement as an example, PwC estimates that you will save 4 hours by using its software, which would result in approximately CHF 1,200 saved if the value of your time is CHF 350 per hour and you only use the software once. If the value of your time is more than CHF 350 or you use the software more than once, the savings increase dramatically because the expense of your software stays the same.

You can find the Relative Advantage Calculators on each of PwC’s product pages. You can change the assumptions in the calculator to fit your situation. If you’d like more information on the Relative Advantage Calculator, you can read our article here. The article describes not just savings in time and money, but also benefits that the calculator does not quantify like risk mitigation and upskilling employees.

Further resources

For an article on PwC's automated promissory note, click here. The article includes information on when you'd use a promissory note instead of a loan agreement, and screenshots of the user experience.

For more information on how an automated document works, there is an explainer video on Coupa’s PartnerVine page.

For a quick introduction, there is an article explaining automated legal documents here.

For an article on the Relative Advantage Calculator, click here.

Legal Information

Finally, a note on how you can use this article. This article is not to be considered legal advice and is not a substitute for advice from qualified legal counsel. You may not rely on the information in this article. Material aspects of the discussions in this article may change at any time and without further notice.

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