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Deed Of Subordination

Deed Of Subordination for the United Kingdom

Deed Of Subordination Template for England and Wales

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Deed Of Subordination

"I need a Deed of Subordination for a senior bank loan of £5M and a junior shareholder loan of £1M, where the junior creditor is restricted from receiving any payments until January 2025 when the senior loan is expected to be fully repaid."

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What is a Deed Of Subordination?

A Deed of Subordination is essential in complex financing arrangements where multiple creditors have claims against the same debtor. Under English and Welsh law, this document formally establishes the ranking of debts and prevents junior creditors from taking enforcement action or receiving payments ahead of senior creditors. The deed is commonly used in corporate finance, acquisition financing, and restructuring scenarios, particularly where there are multiple layers of debt or where existing creditors need to accommodate new financing. It includes detailed provisions on payment restrictions, enforcement limitations, and the treatment of received funds.

What sections should be included in a Deed Of Subordination?

1. Parties: Identifies all parties to the deed including Senior Creditor, Junior Creditor, and Debtor

2. Background: Explains the context of existing debts and reason for subordination

3. Definitions: Defines key terms including Senior Debt, Junior Debt, and Subordination Period

4. Subordination Provisions: Core terms establishing the subordination arrangement

5. Restrictions on Junior Debt: Limitations on payments and enforcement of junior debt

6. Turnover Provisions: Requirements to pay over any received amounts to senior creditor

7. Duration: Period of effectiveness of the subordination

8. Execution: Formal execution blocks for all parties

What sections are optional to include in a Deed Of Subordination?

1. Security Provisions: Required when secured debt is involved - include when either debt is secured

2. Further Assurance: Obligations to take additional steps if required - include in complex arrangements or where future actions may be needed

3. Assignment Provisions: Rules regarding transfer of rights - include when transfer rights are important to parties

What schedules should be included in a Deed Of Subordination?

1. Schedule 1 - Senior Debt Documents: Lists all documents evidencing senior debt

2. Schedule 2 - Junior Debt Documents: Lists all documents evidencing junior debt

3. Schedule 3 - Form of Accession Deed: Template for additional parties to join the arrangement

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓƵ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
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Industries

Law of Property Act 1925: Key legislation governing requirements for deeds, formalities for creation and transfer of interests in land, and rules regarding priority of charges and mortgages.

Companies Act 2006: Legislation covering requirements for execution of deeds by companies, corporate authority and capacity, and registration requirements for company charges.

Insolvency Act 1986: Governs rules regarding priority of creditors, impact on subordination arrangements in insolvency, and validity of subordination agreements in administration/liquidation.

Financial Collateral Arrangements (No.2) Regulations 2003: Regulations covering financial collateral involvement, security arrangements, and priority rules for financial collateral.

Law of Property (Miscellaneous Provisions) Act 1989: Legislation specifying requirements for creation of valid deeds and execution formalities.

Common Law Principles: Established legal principles regarding contractual interpretation, priority of debts, equitable principles, and consideration.

Registration Requirements: Legal requirements for registration with Companies House and Land Registry where applicable to the subordination arrangement.

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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