Document background
The Loan Subordination Agreement is essential in complex financing structures where multiple creditors are involved and a clear hierarchy of debt needs to be established. This document is commonly used in corporate refinancing, acquisition financing, or restructuring scenarios where there are both senior lenders (typically banks) and subordinated creditors (such as shareholders or related companies). The agreement ensures that subordinated creditors cannot receive payments or take enforcement action that would prejudice senior creditors' rights, except under specific permitted circumstances. Under Dutch law, particular attention is paid to the effectiveness of subordination in bankruptcy scenarios, with the agreement typically including specific provisions to address requirements under the Dutch Civil Code and Bankruptcy Act. The document also often includes detailed mechanisms for payment blockages, turnover of receipts, and the role of any security agent or trustee.
