Negative Pledge Agreement Template for England and Wales

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Key Requirements PROMPT example:

Negative Pledge Agreement

"Need a Negative Pledge Agreement for our upcoming £50M loan facility with Deutsche Bank, with specific carve-outs for existing equipment financing and a threshold of £500,000 for permitted security interests."

Document background
A Negative Pledge Agreement is essential in modern financing arrangements under English and Welsh law, particularly where lenders seek to protect their position without taking direct security. This document is typically used alongside facility agreements or other financing arrangements to ensure that a borrower's asset base remains available for creditors. The agreement details prohibited security interests, permitted exceptions, monitoring requirements, and enforcement mechanisms. It's particularly valuable when direct security is impractical or undesirable, or when maintaining flexibility in asset management is important.
Suggested Sections

1. Parties: Identification and details of the contracting parties

2. Background: Context and purpose of the agreement, including reference to any existing facility agreements or other relevant documents

3. Definitions: Key terms used throughout the agreement, including specific definitions of Security Interest, Permitted Security, etc.

4. Negative Pledge Undertaking: Core covenant not to create or permit security interests over the specified assets

5. Duration: Term of the agreement and conditions for termination

6. Enforcement: Rights and remedies available upon breach of the negative pledge

7. Governing Law and Jurisdiction: Specification of English and Welsh law as governing law and jurisdiction for disputes

Optional Sections

1. Permitted Security: Detailed provisions specifying exceptions to the negative pledge, such as security interests arising by operation of law

2. Information Covenants: Obligations to provide information about existing or potential security interests and periodic compliance certificates

3. Cross-Border Provisions: Additional provisions for international aspects including conflict of laws and foreign security registration

4. Representations and Warranties: Additional confirmations regarding existing security interests and authority to enter into the agreement

Suggested Schedules

1. Schedule 1 - Existing Security Interests: Comprehensive list of pre-existing security interests that are permitted under the agreement

2. Schedule 2 - Form of Compliance Certificate: Template document for periodic confirmation of compliance with the negative pledge obligations

3. Schedule 3 - Secured Assets: Detailed description of assets subject to the negative pledge restrictions

4. Schedule 4 - Notice Requirements: Specific requirements for providing notice of any permitted security interests or potential breaches

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

Relevant Industries
Relevant Teams
Relevant Roles
Industries

Companies Act 2006: Primary legislation governing company law in England and Wales, particularly relevant for registration of charges and company powers in negative pledge agreements

Law of Property Act 1925: Fundamental legislation concerning property rights and security interests, which underlies the principles of negative pledge agreements

Insolvency Act 1986: Key legislation regarding enforcement of security interests and insolvency scenarios that may affect negative pledge agreements

Financial Services and Markets Act 2000: Regulatory framework for financial services, particularly relevant when negative pledge agreements involve regulated entities

Financial Collateral Arrangements (No.2) Regulations 2003: Regulations governing financial collateral arrangements which may interact with negative pledge provisions

Companies Registration of Charges Rules: Rules governing the registration of charges with Companies House, relevant for transparency and enforcement of security interests

Common Law - Equitable Principles: Legal principles developed through case law regarding security interests and their enforcement in equity

Doctrine of Constructive Notice: Common law principle determining when parties are deemed to have notice of registered charges and other interests

Rome I Regulation: EU-derived regulation determining choice of law rules for contractual obligations in cross-border transactions

Brussels I Regulation (Recast): EU-derived regulation governing jurisdictional issues in cross-border transactions and enforcement of judgments

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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