Forgivable Promissory Note Template for Germany

The Forgivable Promissory Note is commonly used in scenarios where parties wish to structure a debt obligation that may be forgiven upon meeting certain conditions, typically in employment, business succession, or corporate restructuring contexts. This document type is particularly prevalent in employee retention programs, executive compensation packages, and business transition arrangements. Under German law, special attention must be paid to the precise formulation of forgiveness conditions and their tax implications. The document includes detailed provisions on loan terms, interest calculations, repayment schedules, and specific triggers for forgiveness, all structured to comply with German Civil Code requirements. It serves as a flexible instrument that balances the lender's rights to repayment with incentive structures created through the forgiveness provisions, while ensuring compliance with German banking, tax, and contract laws.

1. Parties: Identification of the lender and borrower with full legal names and addresses

2. Background: Context of the loan, relationship between parties, and purpose of the forgivable note

3. Definitions: Key terms used throughout the document including 'Forgiveness Conditions', 'Loan Amount', 'Interest Rate', 'Maturity Date'

4. Loan Amount and Terms: Principal amount, currency, and basic terms of the loan

5. Interest: Interest rate, calculation method, payment frequency, and default interest provisions

6. Repayment Terms: Schedule of repayment, payment methods, and prepayment provisions

7. Forgiveness Conditions: Specific conditions under which the loan may be forgiven, including triggering events and extent of forgiveness

8. Forgiveness Process: Procedural requirements for loan forgiveness, including notification requirements and documentation

9. Representations and Warranties: Standard declarations by the borrower regarding their legal capacity and financial condition

10. Events of Default: Circumstances constituting default and consequences thereof

11. Governing Law and Jurisdiction: Specification of German law as governing law and jurisdiction for disputes