Document background
The Letter of Subordination of Debts is a critical instrument in Australian financial transactions where multiple creditors are involved in lending to the same debtor. This document becomes necessary when there's a need to establish a clear hierarchy of debt repayment, typically in situations involving corporate refinancing, restructuring, or new debt facilities. It complies with Australian corporate law requirements, particularly the Corporations Act 2001 and relevant banking regulations. The letter explicitly details which debts are being subordinated, to whom, and under what conditions, providing essential protection for senior creditors while allowing companies to maintain multiple debt facilities. Common triggers for creating this document include new senior debt facilities, corporate restructuring, or as part of security arrangements in complex financing transactions.
