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Deed Of Subordination

Deed Of Subordination Template for Australia

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Key Requirements PROMPT example:

Deed Of Subordination

"I need a Deed of Subordination for a real estate development project where a second mortgage lender agrees to subordinate their $2M loan to the senior lender's $10M facility, with the deed to be effective from March 2025."

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Document background
A Deed of Subordination is essential in complex financing arrangements where multiple creditors are involved and a clear hierarchy of debt needs to be established. This document is commonly used in Australia when a company has different types of debt or is taking on additional financing while existing debt remains in place. The deed ensures that junior creditors agree to subordinate their rights to receive payment and take enforcement action to those of senior creditors. It typically includes detailed provisions about payment restrictions, turnover of receipts, and protections in insolvency scenarios. The document must comply with Australian federal and state laws, particularly regarding security interests and property rights. A properly drafted Deed of Subordination is crucial for risk management in lending arrangements and provides certainty for all parties regarding their respective rights and obligations in various scenarios, including default or insolvency.
Suggested Sections

1. Parties: Identifies all parties to the deed including Senior Creditor(s), Subordinated Creditor(s), and the Debtor

2. Background: Recitals explaining the existing debt arrangements, security interests, and purpose of subordination

3. Definitions and Interpretation: Defines key terms including Senior Debt, Subordinated Debt, Enforcement Action, and Trigger Events

4. Subordination: Core provisions establishing the subordination of the junior debt to the senior debt

5. Undertakings by Subordinated Creditor: Commitments from the subordinated creditor regarding their debt and enforcement rights

6. Payment Restrictions: Terms governing when payments can and cannot be made on the subordinated debt

7. Turnover of Receipts: Provisions requiring subordinated creditor to pay any received amounts to senior creditor

8. Protection of Subordination: Provisions ensuring the subordination remains effective in various scenarios including insolvency

9. Power of Attorney: Appointment of senior creditor as attorney to enforce subordination rights if necessary

10. Duration and Release: Terms specifying how long subordination lasts and conditions for release

Optional Sections

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

2. Amendments to Facility Documents: Used when existing facility documents need modification to accommodate subordination

3. Inter-creditor Provisions: Needed when multiple creditors are involved, establishing relationships between different creditor classes

4. Permitted Payments: Details specific circumstances where payments on subordinated debt are allowed

5. Step-In Rights: Required when senior creditor needs rights to take over subordinated creditor's position

6. Debt Purchase Transactions: Include when parties want to regulate ability to buy/sell the subordinated debt

7. Hedging Obligations: Needed when subordination affects hedging arrangements

8. Further Assurance: Additional provisions for complex arrangements requiring future actions to perfect subordination

Suggested Schedules

1. Existing Facilities: Details of all senior and subordinated debt facilities including amounts, dates, and key terms

2. Form of Accession Deed: Template for additional parties to join the subordination arrangement

3. Security Details: List and details of all security interests affected by the subordination

4. Notice Requirements: Forms and procedures for various notices required under the deed

5. Deed of Priority: Where separate deed of priority is referenced or incorporated

6. Payment Waterfall: Detailed order of priority for application of payments or enforcement proceeds

Authors

Alex Denne

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

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Acceleration Event
Accession Deed
Additional Creditor
Authorised Representative
Business Day
Creditor Rights
Default
Discharge Date
Distribution
Enforcement Action
Enforcement Date
Event of Default
Facility Agreement
Finance Document
Financial Indebtedness
Insolvency Event
Junior Debt
Liability
Permitted Payment
Priority Agreement
Prohibited Action
Receiver
Recovery
Refinancing
Related Entity
Security
Security Interest
Senior Creditor Rights
Senior Debt
Senior Discharge Date
Senior Finance Documents
Subordinated Creditor Rights
Subordinated Debt
Subordinated Discharge Date
Subordinated Finance Documents
Subordination
Trigger Event
Trust Property
Turnover Proceeds
Voting Rights
Relevant Industries

Banking and Financial Services

Real Estate and Property Development

Infrastructure

Mining and Resources

Manufacturing

Private Equity

Construction

Telecommunications

Healthcare

Retail

Energy and Utilities

Relevant Teams

Legal

Finance

Treasury

Risk Management

Corporate Finance

Credit

Compliance

Investment

Debt Management

Restructuring

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Corporate Lawyer

Legal Counsel

Banking Lawyer

Finance Manager

Credit Manager

Risk Manager

Debt Manager

Corporate Finance Manager

Investment Manager

Loan Officer

Relationship Manager

Restructuring Manager

Industries
Personal Property Securities Act 2009 (Cth): Governs the registration and priority of security interests in personal property, crucial for subordination arrangements and their effectiveness against third parties
Corporations Act 2001 (Cth): Regulates corporate activities, including requirements for company execution of deeds and corporate insolvency provisions that might affect subordination arrangements
Property Law Act 1958 (Vic) and equivalent state legislation: Sets out the formal requirements for executing deeds and their validity, including witnessing requirements and delivery
Australian Contract Law (Common Law): Provides the fundamental principles for contract formation, including consideration, intention to create legal relations, and capacity
Competition and Consumer Act 2010 (Cth): Contains the Australian Consumer Law, which may be relevant if any party to the deed is considered a consumer or small business
Banking Act 1959 (Cth): Relevant when subordination involves regulated financial institutions and affects priority of debts in banking contexts
Bankruptcy Act 1966 (Cth): Important for understanding how subordination arrangements may be affected by bankruptcy proceedings of individual parties
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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