Collateral Sharing Agreement Template for India

The Collateral Sharing Agreement is essential in complex financing arrangements where multiple creditors hold security interests in the same collateral. This document becomes particularly important in the Indian context where security creation and enforcement are governed by multiple legislations including the SARFAESI Act, Companies Act, and Transfer of Property Act. It establishes the framework for creditor coordination, defines voting rights for key decisions, sets out the mechanism for sharing enforcement proceeds, and typically involves a security trustee structure. The agreement is crucial for protecting creditors' interests while ensuring efficient enforcement of security interests and avoiding conflicts among secured creditors. It addresses specific Indian law requirements regarding security creation, registration, and enforcement, while providing flexibility for different types of secured creditors to participate in the security arrangement.

1. Parties: Identification of all secured creditors participating in the arrangement and the security trustee/agent if applicable

2. Background: Context of the secured facilities, existing security arrangements, and purpose of the collateral sharing agreement

3. Definitions and Interpretation: Definitions of key terms, interpretation rules, and construction principles

4. Security Interests and Ranking: Description of shared collateral and establishment of priority/ranking among secured creditors

5. Appointment and Role of Security Trustee: Terms of appointment, powers, duties, and limitations of the security trustee

6. Decision Making and Voting Rights: Procedures for collective decision-making, voting thresholds, and rights of secured creditors

7. Sharing of Enforcement Proceeds: Rules for allocation and distribution of proceeds from enforcement of security

8. Payment Waterfall: Priority order for distribution of proceeds among secured creditors

9. Enforcement Procedures: Process and conditions for enforcing security interests and exercising remedies

10. Representations and Warranties: Standard representations by each party regarding authority, binding obligations, and no conflicts

11. Information Sharing: Requirements for sharing information among secured creditors

12. Costs and Expenses: Allocation of costs related to security enforcement and agreement administration

13. Amendments and Waivers: Procedures for modifying agreement terms and granting waivers

14. Governing Law and Jurisdiction: Choice of law and jurisdiction for dispute resolution

15. Notices: Communication procedures and contact details for notices