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A Subordination Agreement lets one creditor voluntarily step back in line behind another when it comes to getting repaid. In Nigeria's financial landscape, these agreements help banks and lenders manage their risk levels, especially when dealing with secured loans against the same asset.

For example, if you have both a mortgage and a business loan secured by your property, your mortgage lender might require other creditors to sign a Subordination Agreement. This ensures the mortgage holder gets paid first if you default, which is particularly important under Nigerian property and banking laws. These agreements play a vital role in helping businesses access additional funding while protecting primary lenders.

Use a Subordination Agreement when you need additional financing but already have existing loans secured against your assets. This common scenario in Nigeria's business environment happens when companies seek new credit lines while maintaining their current banking relationships. Banks often require these agreements before approving secondary loans.

The timing is crucial - implement this agreement before finalizing any new loan that might conflict with existing debt priorities. Nigerian law requires clear documentation of creditor rankings, especially for commercial property loans. Getting this agreement in place early helps avoid disputes between lenders and keeps your financing options open while protecting all parties' interests under local banking regulations.

• Basic Debt Subordination: Used in straightforward lending scenarios where one creditor agrees to rank behind another for a single asset
• Complete Subordination: Covers all present and future debts between parties, common in Nigerian corporate financing
• Partial Subordination: Limits the agreement to specific debts or time periods, often used in project financing
• Payment Subordination: Focuses specifically on the order of debt payments rather than security interests
• Cross-Collateral Subordination: Manages priority rights when multiple assets secure different loans, popular in Nigerian real estate development

• Primary Lenders: Usually Nigerian banks or financial institutions holding first-ranking security interests who must approve subordination requests
• Secondary Lenders: Financial institutions agreeing to take a lower repayment priority in exchange for offering additional credit
• Corporate Borrowers: Businesses seeking multiple loans against the same assets, typically requiring legal counsel to review terms
• Legal Counsel: Attorneys who draft and review Subordination Agreements to ensure compliance with Nigerian banking regulations
• Company Directors: Authorized signatories who execute these agreements on behalf of their organizations

• Loan Details: Gather exact amounts, dates, and terms of both existing and new loans to be subordinated
• Asset Information: Document all collateral details, including property descriptions and registration numbers
• Lender Verification: Confirm authorized representatives from all financial institutions involved
• Corporate Authority: Obtain board resolutions authorizing the subordination under Nigerian company law
• Draft Agreement: Use our platform to generate a customized Subordination Agreement that meets Nigerian banking regulations
• Review Points: Check payment terms, enforcement rights, and default provisions align with existing loan documents

• Identification Section: Full legal names and addresses of all creditors, debtors, and secured assets
• Priority Declaration: Clear statement of debt rankings and subordination terms under Nigerian law
• Debt Description: Detailed outline of all affected loans, securities, and payment obligations
• Enforcement Rights: Specific provisions for exercising security interests and remedies
• Duration Clause: Terms specifying how long the subordination remains in effect
• Governing Law: Express choice of Nigerian law and jurisdiction
• Execution Block: Signature spaces for all parties with corporate seal requirements

A Subordination Agreement differs significantly from an Asset Purchase Agreement, though both deal with valuable business assets. While Subordination Agreements arrange creditor priorities, Asset Purchase Agreements handle the complete transfer of asset ownership.

• Purpose: Subordination Agreements manage existing debt rankings; Asset Purchase Agreements facilitate outright sales of business assets
• Parties Involved: Subordination involves multiple creditors and one debtor; Asset Purchase deals with buyers and sellers directly
• Duration: Subordination Agreements remain active throughout loan terms; Asset Purchase Agreements conclude after the sale completes
• Legal Effect: Subordination changes payment priorities under Nigerian banking law; Asset Purchase transfers complete ownership rights under property law
• Risk Management: Subordination manages creditor risks; Asset Purchase handles transfer risks and warranties