2014 Coursera Partners' Conference

Loan Agreement Change Of Control

Lenders are demanding these control amendment provisions, which were originally created in the 1980s after lenders were burned as a result of acquisitions. In the world of syndicated loans and high-yield bonds, these provisions are standard “boiler plates” and, therefore, one would expect their absence to have an impact on the lender`s ability to market paper to institutional investors. 2) The sale of the majority or all assets. A change of control may also include the sale of all or most of the target entity`s assets. As a general rule, a sale transaction may be subject to a change of control if the sale of assets represents at least 50% of the company`s total. 4) This clause is also considered primarily in the case of consolidation, reorganization or other transactions in which more than half of the board members change. If shareholders change, who are allowed to elect more than half of the board of directors, events and standards are derived from certain security rules or the tax code. Puts proxy are provisions that allow borrowers to reassess their loans following a change in the borrower`s board of directors. The puts proxy are somewhat rarer than the similar provisions generated by the capital changes, but they nevertheless appear in the vast majority of loans financed by the loan, especially when the borrower is on the stock exchange or going public during the term of the loan. When drawing up an agreement, it should be noted that such construction clauses/clauses should not be waived. They cannot be the primary clauses, but define the relationship between the parties. That is certainly not their motivating purpose.

The control amendment provisions are intended to protect lenders, not borrowers. In addition, it is unlikely that a change of control, such as. B a proxy-put, excludes a merger or acquisition, since acquirers generally refinance the existing debts of a target company. It is advisable that each commercial contract have an amendment to the control clause in order to avoid future commercial misadventures. Another reason for this clause is that it limits the power of the contractor. Only a few examples for which such a clause can be used are: employment contract; agreement on AMs; partnership agreements; leasing (commercial real estate); Lease; Event management all other commercial contracts may have this clause. If one of the parties decides to retire and transfer its rights to a third party, or if the existing party decides to enter into a partnership with the third party, or if the existing party decides to outsource a sub-contract with the third party, such decisions would affect the administration of the contract, then that clause becomes important.

Comments are closed.