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Letter Of Subordination Of Debts

Letter Of Subordination Of Debts Template for India

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Letter Of Subordination Of Debts

"I need a Letter of Subordination of Debts under Indian law where the parent company's shareholder loan of INR 50 crores to its subsidiary needs to be subordinated to a new bank facility of INR 100 crores from HDFC Bank, with the subordination to be effective from March 1, 2025."

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Document background
A Letter of Subordination of Debts is a crucial document in corporate finance and debt structuring, particularly in the Indian legal context. It is commonly used when a company has multiple creditors and needs to establish a clear hierarchy of debt repayment, typically as part of new financing arrangements or debt restructuring. The document ensures that junior or subordinated creditors cannot receive payments or enforce their rights until senior debt obligations are satisfied, providing security and comfort to senior lenders. Governed by Indian law, including the Indian Contract Act, 1872, Companies Act, 2013, and relevant banking regulations, this document includes detailed provisions about payment restrictions, enforcement rights, and creditor obligations. It's particularly important in scenarios involving group company loans, shareholder funding, or multiple banking arrangements.
Suggested Sections

1. Date and Parties: Identifies the date of the letter and all relevant parties - the debtor, senior creditor(s), and subordinated creditor(s)

2. Reference to Existing Facilities: Identifies the relevant loan agreements, facilities, or debt instruments that are subject to subordination

3. Definitions: Defines key terms such as Senior Debt, Subordinated Debt, Enforcement Action, and other relevant terms

4. Subordination Declaration: Clear statement of subordination, establishing that the subordinated debt ranks behind the senior debt

5. Payment Restrictions: Details of restrictions on payments of subordinated debt while senior debt remains outstanding

6. Turnover Provisions: Requirements for subordinated creditors to turn over any unauthorized payments to senior creditors

7. Duration and Release: Period of effectiveness and conditions for release from subordination obligations

8. Governing Law: Specification of Indian law as the governing law

9. Execution Block: Signature blocks for all parties

Optional Sections

1. Security Interests: Required when the subordination affects secured debts, detailing the priority of security interests

2. Permitted Payments: Include when certain payments to subordinated creditors are allowed under specific conditions

3. Standstill Provisions: Include when subordinated creditors need to agree to specific restrictions on enforcement actions

4. Additional Creditor Accession: Required when new creditors may join the subordination arrangement in the future

5. Cross-Default Provisions: Include when default under one facility should trigger subordination effects across other facilities

6. Inter-creditor Provisions: Required when multiple creditors need to establish their relative rights and obligations

Suggested Schedules

1. Schedule 1 - Details of Senior Debt: Comprehensive list of all senior debt facilities, including amounts, dates, and key terms

2. Schedule 2 - Details of Subordinated Debt: Comprehensive list of all subordinated debt facilities, including amounts, dates, and key terms

3. Schedule 3 - Form of Accession Deed: Standard form for new creditors to accede to the subordination arrangements

4. Schedule 4 - Payment Conditions: Detailed conditions under which payments to subordinated creditors may be permitted

5. Appendix A - Notice Requirements: Templates and procedures for various notices required under the subordination 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
Relevant legal definitions








































Clauses






























Relevant Industries

Banking & Financial Services

Corporate Finance

Private Equity

Investment Banking

Real Estate & Construction

Manufacturing

Infrastructure

Healthcare

Technology

Retail & Consumer Goods

Relevant Teams

Legal

Finance

Treasury

Corporate Finance

Risk Management

Compliance

Credit

Banking

Company Secretarial

Corporate Development

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Corporate Finance Manager

Legal Counsel

Banking Lawyer

Debt Restructuring Advisor

Investment Banker

Credit Risk Manager

Corporate Banking Manager

Relationship Manager

Compliance Officer

Company Secretary

Financial Controller

Restructuring Officer

Industries







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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