Document background
The Loan Subordination Agreement is a crucial document in corporate finance and debt structuring under Swiss law, typically used when a company has multiple layers of debt with different priorities. This agreement becomes essential in scenarios where new debt is being introduced alongside existing obligations, during corporate restructurings, or in preparation for potential financial distress situations. The document establishes a clear hierarchy between creditors, with senior creditors having priority over subordinated creditors in terms of payment rights and enforcement actions. The agreement must comply with Swiss legal requirements, particularly the Swiss Code of Obligations and bankruptcy laws, and typically includes detailed provisions on payment restrictions, turnover obligations, and creditor rights. A well-structured Loan Subordination Agreement is fundamental for maintaining clear creditor relationships and providing certainty in enforcement scenarios.
