Negative pledge Definition

GLOSSARY

Published by a ��˾��ҹ�� Banking & Finance expert

What does Negative pledge mean?

An undertaking by a borrower not to create or permit to subsist any security interest or encumbrance over its assets without the consent of the lender.

View the related checklists about Negative pledge

Perfecting security in real estate finance transactions—checklist

Perfecting security in real estate finance transactions—checklist This Checklist sets out the steps which property lawyers need to take to perfect security in a real estate finance transaction. Real estate finance lenders will typically want to take a full security package over all of the assets relating to the real estate. A real estate lawyer in a multi-disciplinary team will likely be responsible for arranging or inputting into the following securities and documentation: • security over the land, rental income, insurance proceeds, development and construction and contractual rights • reviewing the management agreement and negotiating a duty of care agreement (although in a multi-disciplinary team, this is sometimes handled by the banking and finance lawyer) • dealing with completion undertakings and post completion registration of the legal charge at Companies House and HM Land Registry as well as giving third party notices regarding rent payment, notice of charge where necessary of assignment of contractual rights or warranties See Practice Notes: Security in real estate finance transactions, Taking security over land...

Ireland—Checklist: practical first steps if your company is considering borrowing money

Ireland—Checklist: practical first steps if your company is considering borrowing money Constitutional and other documents Check the borrower’s constitutional and other documents to first establish that: • the borrower has the requisite power under its constitutional documents (ie company constitution or partnership deed etc) to borrow and give security, and • no other agreement entered into by the borrower would prohibit or otherwise restrict the borrower from new/additional borrowing or granting security (see negative pledge language in other financing, leasing or security documents) Lessons learned Once the borrower’s power and authority have been established, it is useful to locate and review any existing loan documentation for lessons learned, to establish what works (don’t re-invent the wheel!), what doesn’t work (don’t perpetuate known problems), and what could be improved. Everyone can be wise with the benefit of hindsight. Consult the COO and CFO (as a minimum). Ask the following questions: • who are the existing bankers to the business? What is the nature of the relationship? Tip: a lender with whom...

Terms and conditions—first time issuer's negotiation checklist

Terms and conditions—first time issuer's negotiation checklist What this checklist covers This checklist outlines the key points that a lawyer advising a first time issuer should check and, if necessary, seek to amend when reviewing English law terms and conditions for an issue of debt securities. This checklist contains material relevant to: • secured and unsecured debt securities • debt securities constituted by a trust deed, and • debt securities issued without trust deeds, such as: ◦ debt securities issued under a fiscal agency structure—for information on fiscal agents, see Practice Note: Role of a fiscal agent, and ◦ debt securities constituted by an instrument executed by the issuer (and guarantor, if applicable) without a trustee, of the kind used in issues of mini-bonds (a bond instrument) This checklist should be read together with Practice Note: Terms and conditions—first time issuer's guide, which: • explains the practical aspects of the key individual provisions (conditions) usually found in the terms and conditions of debt securities • compares them with the...

Priority between security interests—practical examples

Priority between security interests—practical examples This Practice Note sets out examples of how the rules on priority could work in practice with reference to the relevant priority rules under English law. It complements and should be read in conjunction with our other Practice Notes on priority. Additional examples are added to this Practice Note on a regular basis. If you come across a priority situation in practice that you would like us to include, please use the LexisAsk function to let us know. Practice Note: Priority between security interests sets out the rules on priority from a more technical perspective and should be used for information about the black letter law which underpins the practical examples in this Practice Note. It is important to note that English law priority rules are complex and are generally accepted not to be clear in every respect. The rules can also be affected by the actions of the parties meaning that law firms will often not give an opinion on the...

Discover our 95 Practice Notes on Negative pledge

Short-form facility agreement (term loan): single company borrower—bilateral—unsecured

Short-form facility agreement (term loan): single company borrower—bilateral—unsecured Facility agreement This Agreement is made on [date] Parties 1 [insert name of Borrower], a company incorporated in England and Wales with registered number [insert company number] whose registered office is at [insert address] (the Borrower); and 2 [insert name of Lender], of [insert address] (the Lender). It is agreed as follows: 1 Definitions and interpretation 1.1 In this Agreement, unless otherwise provided: Business Day • means a day, other than a Saturday, Sunday or public holiday, on which banks are open for business in London; Commitment • means £[•] ([•] Sterling) minus any amount reduced or cancelled in accordance with this Agreement; Commitment Period • means the period commencing on the date of this Agreement to and including [•]; Default • means an event that with the giving of notice, lapse of time or other applicable condition would be an Event of Default under Clause 16; Drawdown • means [the OR a] utilisation of the...

Deed of set-off: for use with a bilateral facility agreement—single company borrower

Deed of set-off: for use with a bilateral facility agreement—single company borrower This Deed is made on [insert day and month] 20[insert year] Parties 1 [insert name of Company], a company incorporated in England and Wales with registered number [insert company number] whose registered office is at [insert address] (the Company); and 2 [insert name of lender], of [insert address] (the Bank). Background (A) The Company has liabilities to the Bank under the Facility Agreement. [The Company also has money standing to the credit of the Deposit Account[s].] (B) In consideration of the Bank making, or continuing to make, the Facility available to the Company, the Company has agreed to enter into this Deed. It is agreed as follows: 1 Definitions and interpretation 1.1 Definitions In this Deed, unless the context otherwise requires: [Deposit Account[s] • means [insert details of account[s]] held at the Bank for the account of the Company, as the same may be replaced or redesignated from time to time;] Facility...

Dive into our 9 Precedents related to Negative pledge

What does 'in the ordinary course of business' mean in connection with floating charge asset disposals?

What does 'in the ordinary course of business' mean in connection with floating charge asset disposals? The ability of a chargor to dispose of or otherwise deal with assets in the ordinary course of business is the hallmark of a floating charge. Chargors are therefore permitted to dispose of and deal with floating charge assets in the ordinary course of business prior to crystallization even if this is not specifically stated in the debenture or other finance document. The debenture may include a provision permitting the chargor to deal with their floating charge assets 'in the ordinary course of business' (effectively restating the law). Alternatively, the lender may want to impose additional controls on how the chargor deals with floating charge assets, eg by a negative pledge or a prohibition on disposals of floating charge assets except in the ordinary course of trading (see: Practical application). Understanding the meaning of 'ordinary course of business' in this context can be helpful: • in the context...

Where land being sold for value is subject to a fixed and floating charge with negative pledge at Companies House in respect of a charge which is also registered at the HM Land Registry, is anything else required to release the charge and pledge over the property beside a DS2/electronic discharge of the charge and a certificate of non-crystallisation?

Where land being sold for value is subject to a fixed and floating charge with negative pledge at Companies House in respect of a charge which is also registered at the HM Land Registry, is anything else required to release the charge and pledge over the property beside a DS2/electronic discharge of the charge and a certificate of non-crystallisation? It is often the case that a company will secure borrowing by way of a fixed and/or a floating charge over its assets. A fixed charge is a charge that specifically relates to an asset, whereas a floating charge is one which crystallises into a fixed charge on the happening of a particular event. A negative pledge is an agreement not to give a charge or debenture to any other person. A discharge of a charge is effected by either Form DS1 or Form DS3 (the latter relating to release of part of the land from a registered charge), which are completed by the lender. Form AP1...

See the 13 Q&As about Negative pledge

Arbitration agreements and insolvency processes (Sian Participation v Halimeda)

Restructuring & Insolvency analysis: The Privy Council recently confirmed that a winding-up petition should not be stayed or dismissed because the underlying debt is subject to an arbitration agreement, unless the debtor can demonstrate that the debt is disputed on genuine and substantial grounds. The decision represents a deviation away from the previously held decision in Salford Estates (No 2) Ltd v Altomart Ltd that the court should generally exercise its discretion to stay a winding-up petition so that the petitioner can first establish the debt by an arbitration award, unless there are exceptional circumstances. It provides helpful clarification on the interplay between insolvency and arbitration in that it carefully balances the public interest in insolvent companies being placed into an insolvency process expeditiously (and assets realised for distribution to creditors as a whole) and the public policy that those who agree to arbitrate disputes are held to that agreement. Written by Kit Smith, managing associate at Keidan Harrison LLP.

Adler appeal—restructuring plan sanction order overturned (Re AGPS Bondco plc)

Restructuring & Insolvency analysis: this case considers the successful appeal to a sanctioned restructuring plan. A restructuring plan was proposed by a German property group to permit its controlled wind down (the ‘Plan’). The sanction hearing involved the first fully contested valuation challenge under the plan jurisdiction and required the exercise of the cross-class cram down power afforded by Part 26A of the Companies Act 2006 (CA 2006). The Court of Appeal overturned the sanction of the Plan, a decision primarily based on the failure of the Plan to accord with the pari passu principle of distribution that would have been applicable in the relevant alternative to the Plan of a formal insolvency. Written by Imogen Beltrami, barrister at South Square Chambers.

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