Deed Of Subordination Template for Pakistan

The Deed of Subordination is a crucial document in Pakistani financial transactions where multiple creditors are involved in financing the same debtor. It is commonly used in scenarios such as corporate refinancing, acquisition financing, or project finance where there is a need to establish a clear hierarchy of debt repayment. The deed specifically details how junior (subordinated) debt is ranked below senior debt, including mechanisms for payment priorities, restrictions on subordinated creditors' enforcement rights, and obligations to turn over any payments received in breach of the subordination arrangements. Under Pakistani law, particular attention must be paid to registration requirements, stamp duty obligations, and compliance with banking regulations when financial institutions are involved. The document becomes especially relevant during financial distress situations, providing clarity on creditors' rights and helping to prevent disputes over payment priorities.

1. Parties: Identifies all parties to the deed including the debtor, senior creditor(s), and subordinated creditor(s)

2. Background: Recitals explaining the existing debt arrangements and the purpose of the subordination

3. Definitions and Interpretation: Defines key terms used throughout the deed, including Senior Debt, Subordinated Debt, Enforcement Action, etc.

4. Subordination: Core section establishing the subordination of the junior debt to the senior debt

5. Undertakings by Subordinated Creditor: Specific promises and restrictions on the subordinated creditor's actions

6. Payments and Treatment of Subordinated Debt: Rules governing payments on the subordinated debt and treatment of any received amounts

7. Turnover of Receipts: Provisions requiring subordinated creditors to turn over any payments received in breach of the deed

8. Protection of Subordination: Mechanisms to ensure the subordination remains effective

9. Power of Attorney: Appointment of senior creditor as attorney to enforce subordination provisions

10. Duration and Release: Term of the subordination and conditions for release

11. Representations and Warranties: Standard declarations by all parties regarding their capacity and authority

12. Governing Law and Jurisdiction: Specifies Pakistani law as governing law and relevant jurisdiction for disputes