Inter-Company Subordinated Loan Agreement
PricewaterhouseCoopers AG
This agreement is a standard Swiss-law governed, short-form, bilateral loan agreement between two group companies, where it is intended that the loan will be subordinated to the claims of other existing and/or future creditors.
Author's Note
The Subordinated Loan Agreement (intra-group) is a standard Swiss-law governed short-form, bilateral loan agreement between two group companies, where it is intended that the loan will be subordinated to the claims of other existing and/or future creditors. Intra-group funding may be subordinated for a variety of reasons, for example to implement a group financing strategy and tax planning or to help stabilise the borrower’s financial situation in times of (potential) over-indebtedness. Note that the subordination may require certain formalities including corporate approvals and/or tax review and assessment of the terms of the transaction to ensure compliance with the arm’s length principle. The subordination may apply to the payment of interest, as well as to the principal amount of the loan. Under the subordinated loan agreement, the user must specify a repayment date, subject to and conditional upon the subordination. If the subordination is still in...
Read moreThe Subordinated Loan Agreement (intra-group) is a standard Swiss-law governed short-form, bilateral loan agreement between two group companies, where it is intended that the loan will be subordinated to the claims of other existing and/or future creditors.
Intra-group funding may be subordinated for a variety of reasons, for example to implement a group financing strategy and tax planning or to help stabilise the borrower’s financial situation in times of (potential) over-indebtedness. Note that the subordination may require certain formalities including corporate approvals and/or tax review and assessment of the terms of the transaction to ensure compliance with the arm’s length principle.
The subordination may apply to the payment of interest, as well as to the principal amount of the loan. Under the subordinated loan agreement, the user must specify a repayment date, subject to and conditional upon the subordination. If the subordination is still in existence, the repayment date is automatically deferred.
The agreement includes standard representations and warranties appropriate for use in an intra-group agreement.
Terms which are configurable to the user’s needs include:
- 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.
Circumstances of Use
This document is intended solely for intra-group financing purposes and includes (as standard) an event of default if the borrower ceases to be a member of the group. It is not appropriate for arm’s length (third party) loan agreements.
The Subordinated Loan Agreement (intra-group) may be used for cross-border transactions where the parties have agreed to use Swiss law.
Terms of Use
The purchase of this Product is subject to PartnerVine Terms.
You (the registered user through whose account the purchase is made) may:
- Access the document-generation interview for 90 days from date of purchase;
- Export and download an unlimited number of copies of the document(s) in Word or pdf format;
- Share and use the document copies in connection with the circumstances described in this Author’s Note and only for the ordinary business purposes of the group of companies to which you belong.
Other Comments
No warranty or representation is given or made as to the appropriateness or impact of the financing transactions envisaged by this document in the specific circumstances of any given group of companies. No legal or tax advice is provided and nothing in this template or the related user interview shall be deemed to constitute the provision of legal or tax advice in relation to any fact or matter. Where necessary, specialist legal and tax advice and input from group treasury and accounting functions should be sought prior to executing this agreement.
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Frequently asked questions
Purposes can be: (1) working capital and general financing, (2) loan as settlement of purchase price for assets: suitable if the loan is being granted in connection with the purchase of assets by the Borrower from the Lender. (3) other
If the loan has already been made available, the agreement will have retrospective effect.
(1) all existing, (2) all future, (3) all existing and future.
Yes. It is recommended that the Loan and the Subordination in particular are approved in advance by the relevant bodies of the Lender.
The following options are possible:
(1) Borrower's audited (interim) financial statements show that, after taking account of the subordination, one half of its share capital and legal reserves is covered by available assets.
(2) Lender definitively waives its right to repayment of the loan.
(3) loan is converted into equity of Borrower.
(4) another creditor subordinates a balance of at least the same amount.
(5) alternative event(s) of termination may be defined for the subordination.
Yes, if disclosed in the agreement.
The eventual right (must be stated in the contract) may only be exercised if subordination is no longer in force. Termination by the Lender results in early repayment of the loan.
The Borrower may not repay the loan early unless expressly stated in the agreement. The repayment may be: (a) in whole or in part, (b) in whole, (c) in part.
I is stated in the agreement whether notice of early repayment shall be necessary. For intra-group loans, you should assess whether notice of early repayment is required by group treasury function, and if so what formalities are appropriate (in writing, notice period, etc).
Outstanding payments may either be due (1) immediately: The loan will be due for immediate repayment and the agreement will come to an end. Or (2) on demand: The agreement remains in place until the loan is repaid, but the Lender may demand repayment at any time.
First, you should consider the appropriateness of additional Borrower covenants in context of intra-group financing policy and group treasury requirements.
Nevertheless, the following are plausible:
(1) Inform Lender of any major business changes relevant to the performance of this agreement.
(2) Inform Lender on request of all material changes to its accounts.
(3) Provide Lender with copies of its financial statements.
(4) Maintain minimum net debt/EBITDA ratio (to be defined).
(5) 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.
The Lender and the Borrower can agree that (a) each party pays its own costs, (b) the Lender pays all costs or (c) the Borrower pays all costs.