Creating a Facility Agreement (UK)

Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Creating a facility agreement can offer businesses a secure and efficient way to manage their finances. It is a legally binding contract between the lender and borrower which outlines the terms and conditions of the loan, such as the amount, interest rate, repayment schedule, and other details. With skilled legal expertise required to ensure that both parties are protected under such an agreement it is important to have an experienced lawyer review it before signing to ensure that all elements are fair and reasonable.

It is also crucial for those entering into facility agreements to consider the risks associated with taking on any loan; defaulting on obligations could lead to legal action from the lender or even repossession of assets by debt collectors - all of which need taking into account before signing. As well as outlining these general risks, lawyers should tailor agreements to suit unique circumstances of each business’s needs. This includes understanding both short-term commitments such as payment schedules and long-term ones like durations of loans or security arrangements – all in order to protect borrowers if they do unfortunately find themselves in breach at any point during or after proceedings.

When considering a facility agreement it’s easy for businesses who deem themselves ‘non-legal’ experts feel overwhelmed by complexity but here at Genie AI we provide help every step along the way – no matter what skill level you may be at with regards understanding your rights when entering into a loan contract. With our template library being open source, millions of datapoints teach our AI what constitutes market-standard provisions so anyone can customize high quality agreements without requiring legal counsel - or even an account with us!
We understand that having clarifying information regarding rights easily accessible is vital when making decisions about contracts so read on below for our step-by-step guidance today about how you can access our free templates now!

Definitions

Governing law – The set of laws that applies to a particular situation, in this case a loan agreement.
Syndicated loan – A type of loan provided by multiple lenders.
Hedging strategies – Strategies used to manage the risk of a loan, such as interest rate swaps or currency hedging.
Collateral – Property or assets pledged by a borrower in order to secure a loan.
Guarantees – Promises made by an individual to ensure that a loan will be repaid in full.
Covenants – Conditions that must be met in order for a loan to remain in good standing.
Events of default – Events that trigger the lender’s right to demand immediate repayment of the loan.
Acceleration of payments – When a borrower fails to make the required payments on time, the lender may demand that the entire loan amount be repaid immediately.
Termination of the agreement – If the borrower fails to comply with the terms of the loan agreement, the lender may terminate the agreement and demand that the borrower pay back the remaining balance of the loan immediately.

Contents

1. Overview of facility agreement
2. Definition of facility agreement
3. Purpose of facility agreement
4. Key considerations when drafting and signing a facility agreement
5. Choice of governing law
6. Nature of lenders
7. Regulatory requirements
8. Types of facility agreements
9. Revolving credit facility
10. Term loan
11. Syndicated loan
12. Documentation and disclosure requirements
13. Financial statements
14. Credit ratings
15. Security documents
16. Negotiation and documentation of key terms
17. Interest rate
18. Repayment terms
19. Fees and costs
20. Covenants
21. Events of default
22. Rights and obligations of parties
23. Rights of lenders
24. Rights of borrower
25. Obligations of lenders
26. Payment of interest
27. Provision of funds
28. Risk management and security
29. Hedging strategies
30. Collateral
31. Guarantees
32. Enforcement of facility agreement
33. Acceleration of payments
34. Termination of the agreement
35. Enforcement of security interests
36. Regulatory considerations
37. Anti-money laundering requirements
38. Anti-bribery and corruption requirements
39. Regulatory filings
40. Dispute resolution
41. Negotiation
42. Mediation
43. Litigation
44. Tax implications of a facility agreement
45. Tax treatment of interest payments
46. Tax treatment of principal payments
47. Termination of the facility agreement
48. Voluntary termination
49. Involuntary termination
50. Consequences of termination

Get started

Overview of facility agreement

• Understand the purpose of a facility agreement
• Learn what a facility agreement is and what it is used for
• Acquire the information you need to create a facility agreement
• Be aware of the key elements of a facility agreement
• Understand the legal aspects of a facility agreement
• Be aware of the implications of a facility agreement

When you can check this off your list and move on to the next step:

• When you have a thorough understanding of the purpose of a facility agreement, its key elements and legal aspects, and the implications of a facility agreement.

Definition of facility agreement

• Understand the purpose of the facility agreement, which is to create an agreement between two parties regarding a loan or other financial arrangement
• Identify the two parties involved in the agreement, which includes the lender (also known as the “creditor” or “provider”) and the borrower (also known as the “borrower”, “debtor”, or “customer”)
• Establish the terms of the loan or other financial arrangement, including the amount of the loan, the repayment schedule, the interest rate, and any collateral that may be required
• Clearly define the rights and obligations of both parties in the agreement
• When you have completed the above steps, you have defined the facility agreement and you can move on to the next step.

Purpose of facility agreement

• Understand the purpose of a facility agreement and why it may be needed
• Identify the different types of facility agreements and the purpose of each
• Determine the best facility agreement for the desired purpose
• Assess the risks and benefits of the facility agreement
• Checklist of action items to complete before drafting the facility agreement
• Check that the facility agreement is compliant with applicable laws and regulations

Once you have a clear understanding of the purpose of a facility agreement, the different types of facility agreements, the best facility agreement for the desired purpose, assessed the risks and benefits of the facility agreement and checked a checklist of action items to complete before drafting the facility agreement, you can move on to the next step.

Key considerations when drafting and signing a facility agreement

• Consider the parties involved and the purpose of the agreement
• Think about the form of the agreement and the choice of governing law
• Agree on the terms and conditions and the security which may be required
• Consider the roles and responsibilities of the parties and what will happen in the event of a breach
• Ensure that all parties are aware of their duties, obligations and liabilities
• Set out a repayment schedule and the interest rate
• Agree on any potential fees
• Make sure to include a clause on events of default
• Check the agreement for accuracy and have it signed by all parties

Once all the key considerations have been addressed and the agreement is signed by all parties, you can move on to the next step in the guide.

Choice of governing law

• Consider the governing law of the facility agreement and the jurisdiction in which disputes would be litigated
• Choose one of the approved governing laws: English law, Scottish law or Northern Irish law
• Make sure that the governing law selected is properly incorporated into the document
• Ensure that the governing law is suitable for all parties to the agreement
• Once the governing law has been selected and agreed, you can move on to the next step: Nature of lenders

Nature of lenders

• Identify the lenders that will be party to the Facility Agreement
• Determine if the lenders will be a syndicate, or a single lender
• Consider the type of lender, e.g. a bank, a financial institution, a private investor, etc.
• Ensure the lenders are authorised to provide the services they will be providing
• If the Facility Agreement covers a syndicate, consider if any of the lenders will be taking a lead role
• Record all details of each lender in the Facility Agreement
• When all details of the lenders have been included, you can move on to the next step: Regulatory Requirements.

Regulatory requirements

• Read and understand the applicable financial services regulations
• Ensure that the facility agreement is compliant with the regulations
• Make sure to obtain the necessary permissions and consents
• Be aware of any potential conflicts of interest
• Check if the lenders need to be authorised
• When you have checked off all of the above, you can move on to the next step.

Types of facility agreements

• Understand the types of facility agreements available in the UK, such as term loan, revolving credit, overdraft, etc.
• Determine which type of facility agreement is best suited to your business needs.
• Consider the costs and benefits of each type before selecting one.
• When you have selected the right type of facility agreement for your business, you can proceed to the next step.

Revolving credit facility

• Review the terms and conditions of the revolving credit facility agreement
• Check the interest rate and repayment period for the facility
• Consider any fees and charges that may be imposed
• Ensure that the facility is for an adequate amount
• Check that any covenants set out in the agreement are achievable
• Check that there are no security arrangements required
• Examine any guarantees that may be provided by a third party
• Ensure that any events of default are limited and clear
• When all necessary changes have been made, sign and date the agreement
• You can check this off your list when the agreement is signed by you and all parties involved.

Term loan

• Define the term loan, including the amount and the purpose of the loan
• Determine the repayment terms and the repayment schedule
• Decide on the interest rate, and the conditions for any potential adjustments
• Specify the collateral to secure the loan
• Agree on the fees and costs associated with the loan
• Outline the events of default and the consequences of default
• Establish the governing law
• Execute the Facility Agreement

You will know when you can check this off your list and move on to the next step when the Facility Agreement has been signed by both the lender and the borrower.

Syndicated loan

• Understand the legal framework of a syndicated loan: Research loan agreement and applicable laws governing it.
• Seek advice from an experienced lawyer to understand the implications of taking a syndicated loan.
• Agree on the terms of the loan: Interest rate, repayment terms, security, covenants and other financial terms.
• Draft a facility agreement outlining the terms of the loan.
• Negotiate the terms of the loan with the lender.
• Once all parties agree on the terms, sign the facility agreement.

Once you have completed the steps above you can check this off your list and move on to the next step, Documentation and disclosure requirements.

Documentation and disclosure requirements

• Obtain from each lender copies of its standard facility agreement, disclosure letter and controlling lender letter
• Ensure that the facility agreement does not contain any terms which are not acceptable to the borrower and its guarantors
• Obtain copies of the borrower group’s last audited financial statements and the latest management accounts
• Ensure that the borrower group is up-to-date with all filing requirements with Companies House
• Ensure that the borrower group is up-to-date with all filing requirements with HMRC
• Once all of the above requirements have been completed, this step can be checked off the list and the next step can be commenced.

Financial statements

• Obtain the most recent audited financial statements of the facility agreement parties
• Ensure that the financial statements are up to date and are in accordance with UK Generally Accepted Accounting Principles (UK GAAP)
• Contact your accountant to review the financial statements and ensure they are accurate
• Once the financial statements have been reviewed and are in order, you can move on to the next step of the process, which is to assess credit ratings.

Credit ratings

• Contact the three major credit reporting agencies (Experian, Equifax, and TransUnion) to obtain a credit report on the company
• Review the report to determine the company’s credit rating
• Look for any discrepancies that could affect the company’s credit score
• Make a note of the credit rating and any discrepancies to include in the agreement
• Once you have the credit report and rating, you can move on to the next step of the guide, which is to prepare the security documents.

Security documents

• Obtain the legal opinion from the company’s solicitors to confirm its corporate status, authority and capacity to enter into the agreement
• Consider any security documents that may be necessary to secure the loan (e.g. charge over assets, share charge, fixed and floating charges, personal guarantees)
• Agree the terms of the security documents with the company’s solicitors, the company and the lender
• Review the security documents and confirm that the security package is adequate
• Execute the security documents
• Submit the executed security documents to the lender for registration

When all of the above steps have been completed, you can proceed to the next step - Negotiation and documentation of key terms.

Negotiation and documentation of key terms

• Identify the key terms that need to be negotiated and documented, including:
• The amount of the loan and repayment schedule
• Interest rate
• Security documents
• Any other terms that are important to the parties
• Negotiate the terms between the borrower and the lender
• Prepare draft terms to be reviewed and agreed by both parties
• Once the terms are agreed, prepare the final Facility Agreement, incorporating the agreed terms
• Have the Facility Agreement reviewed by legal counsel
• Execute the Facility Agreement and return it to the lender
• You can check this off your list once the Facility Agreement has been executed and returned to the lender.

Interest rate

• Calculate the interest rate that applies to the facility agreement.
• Consider the legal framework for setting the interest rate and the borrower’s ability to pay.
• Determine the type of interest rate, such as a fixed rate or variable rate.
• Include the interest rate in the facility agreement.
• Once the interest rate has been calculated and included in the facility agreement, it can be checked off your list and you can move on to the next step.

Repayment terms

• Decide on a repayment plan and the terms of the repayment.
• This should include any interest payments, how often they need to be paid and how the amount will be calculated.
• Include a repayment schedule in the agreement, setting out when and how much is to be repaid.
• Ensure that any additional costs, such as late payment fees, are laid out in the agreement.
• To check off this step, make sure that all the repayment terms are clearly laid out and agreed to by both parties.

Fees and costs

• Identify who is responsible for paying the fees and costs associated with the facility agreement
• Specify what types of fees and costs are payable (e.g. legal, accounting, and other related costs)
• Agree on who will pay the fees and costs associated with the facility agreement
• Include any costs associated with the facility agreement such as stamp duty
• Include details of any financial penalties for late payment of fees and costs
• Specify who is responsible for paying the fees and costs in the event of a default
• Specify the currency in which the fees and costs will be paid

Once these details have been agreed and included in the facility agreement, you can check this off your list and move on to the next step.

Covenants

• Establish the covenants of the parties.
• Covenants are the conditions in the agreement that each party must abide by.
• Include provisions outlining the rights and obligations of each party.
• Specify restrictions, such as prohibitions on the transfer of ownership and any limits on the use of the facility.
• Make sure to include a clause that outlines the process for amendment or termination of the agreement.

When you have established the covenants of the parties, then you can check this off your list and move on to the next step.

Events of default

• List the various events of default that would result in a breach of the agreement.
• Set out the consequences for each event of default, including the obligation of the parties to provide notice of the event of default and the period for rectifying the breach.
• Include an obligation for the parties to inform each other of any events of default that come to their attention.
• Include a provision allowing the parties to waive any event of default without waiving their rights in the future.
• Make sure all notices are in writing, and are sent to the address of each party.

Once you have listed out the events of default and their consequences, you can move on to the next step.

Rights and obligations of parties

• Identify the parties to the Facility Agreement and set out their respective rights and obligations
• Agree on the covenants each party is obliged to observe
• Consider legal advice for any matters of interpretation
• Draft the Facility Agreement, incorporating all the agreed terms
• Ensure all parties sign and date the Facility Agreement
• Check that the Facility Agreement is legally binding and enforceable
• Once complete, the Facility Agreement should be stored in a safe place

You will know you can check this step off your list and move to the next step when the Facility Agreement has been signed and stored in a safe place.

Rights of lenders

• Understand and research the rights of lenders as they pertain to the facility agreement
• Identify the rights of lenders in the agreement and ensure they are included
• Include the right of lenders to receive interest payments on the loan
• Ensure the right of lenders to receive repayment of the loan is stated within the agreement
• Make sure the right of lenders to charge a fee for the loan is included
• Include the right of lenders to terminate the agreement if the borrower defaults
• Check that the right of lenders to charge a penalty fee for late payments is included
  Once all of the rights of lenders have been identified and included in the agreement, you can move on to the next step.

Rights of borrower

• Understand that borrowers have the right to be informed of changes to the terms of the facility agreement
• Know that borrowers have the right to be informed of any fees and expenses due
• Be aware that borrowers have the right to access records of the facility agreement and associated documents
• Make sure the borrower has the right to object to any proposed changes to the facility agreement

Once you have reviewed the rights of the borrower, you can move on to the next step, which is outlining the obligations of lenders.

Obligations of lenders

• Lenders must not require any additional security or guarantees in respect of the facility agreement
• Lenders must provide the facility in a timely manner and be available when the borrower requests it
• Lenders must not demand repayment of the facility before the agreed term of the agreement
• Lenders must not charge the borrower any fees or charges other than those stated in the agreement
• Lenders must not modify or change the terms of the agreement without the borrower’s consent

You’ll know you can check this off your list and move on to the next step when you have reviewed all of the lenders’ obligations and confirmed that they are in line with the terms of the agreement.

Payment of interest

• Interest will be paid by the borrower to the lenders at the rate specified in the agreement.
• Interest will be payable annually, in arrears on the date specified in the agreement.
• Interest payments will be calculated on a daily basis and will be paid in one lump sum, on the date specified in the agreement.
• When all interest payments have been made, you can check this off the list and move on to the next step of the process, provision of funds.

Provision of funds

• Agree upon the amount of funds to be provided by each party
• Determine if the funds will be provided in one lump sum or in installments
• Include a clause that states the terms under which the funds are to be provided
• Specify the time frame in which the funds are to be provided
• Include a clause that outlines any restrictions or obligations placed on the use of the funds
• Decide who is responsible for any taxes or fees associated with the transfer of funds

When you have agreed upon the amount of funds to be provided, the terms of the provision, the time frame and any restrictions or obligations, you can check this off your list and move on to the next step of Risk Management and Security.

Risk management and security

• Identify, analyse and manage the risks associated with the facility
• Ensure that appropriate security is provided over the facility
• Determine the scope of the security package required
• Establish which assets should be included in the security package
• Consider the form of security required and the legal formalities associated with it
• Set out the details of the security package in the agreement
• When all the requirements of this step have been met and included in the agreement, you can move on to the next step.

Hedging strategies

• Understand the difference between forward contracts, futures contracts and other derivatives
• Research the best hedging strategies for your particular agreement
• Speak to a financial advisor to understand the risk/reward associated with each strategy
• Consider the costs and benefits of each strategy before deciding on one
• Speak to a lawyer to ensure the hedging strategy is legally sound
• Make sure the hedging strategy is documented in the facility agreement
• When you have chosen and documented the hedging strategy, you can move on to the next step: collateral.

Collateral

• Determine what type of collateral will be used to secure the agreement.
• Collateral can include, but is not limited to, property, cash, securities and other financial assets.
• Determine the value of the collateral and agree on the amount of the collateral that each party must provide.
• Document the collateral agreement in the Facility Agreement.
• When the collateral agreement is documented, you can check off this step and move on to the next step, which is to agree on the guarantees.

Guarantees

• Draft a section outlining the guarantees expected from each party to the agreement.
• Include a clause that states that no party will be liable for any losses suffered by the other, except in circumstances where it has been explicitly agreed.
• Ensure that all guarantees are in compliance with relevant regulations.
• Make sure that the guarantees are appropriate for the specific agreement.
• Make sure to include any other relevant guarantees in the agreement.

Once all the guarantees have been drafted and agreed upon, this step can be checked off the list and the enforcement of the facility agreement can be addressed.

Enforcement of facility agreement

• Consider the various enforcement options available and the potential consequences of each:
• Court action
• Acceleration
• Repossession
• Termination
• Suspension of contractual rights
• Cross-default provisions
• Decide which enforcement options are suitable for the agreement and include them in the document.
• Ensure that the agreement is drafted in accordance with applicable legal requirements.
• You can check this step off your list and move on to the next step once you have included all the suitable enforcement options in the agreement.

Acceleration of payments

• Draft an acceleration clause that outlines the conditions under which the lender may demand repayment of the entire facility amount or any part of it
• Include provision in the clause for the lender to give notice to the borrower of the demand for repayment
• Ensure that the acceleration clause is enforceable and that the lender is able to enforce its rights under the facility agreement
• Set out the process to be followed in the event that the borrower fails to make the payment demanded by the lender
• When the clause is complete, you can move on to the next step of Terminating the Agreement.

Termination of the agreement

• Specify in the agreement the circumstances under which the facility may be terminated, including the actions of either party that could result in a termination
• Include a clause that outlines the consequences of a facility termination, such as any fees and costs that will be incurred
• Specify a notice period in the agreement for the termination of the facility
• Outline the procedure for transferring assets and liabilities associated with the facility when it is terminated
• Once all the above points have been included in the agreement, you can move on to the next step of enforcing security interests.

Enforcement of security interests

• Ensure that all security interests are enforceable under the law of the UK, including any third party guarantees.
• Review the financial status of any guarantors, including their credit rating and capacity to meet any obligations under the agreement, and take the necessary steps to protect the lender’s interests.
• Consider registering any security interests with the appropriate government authority, such as the UK Companies House.
• Make sure that the lender’s rights are clearly stated in the facility agreement, including the right to take possession of the security assets in the event of a default.
• When all the necessary steps have been taken, you can move on to the next step of Regulatory Considerations.

Regulatory considerations

• Seek independent legal advice to ensure you comply with all applicable regulations
• Consider whether any additional regulatory filings are required
• Ensure the Facility Agreement complies with all applicable UK laws and regulations
• Research and understand any relevant regulations that apply to the Facility Agreement, such as the Consumer Credit Act 1974
• Check that all applicable regulations have been included in the Facility Agreement
• When you are confident that the Facility Agreement complies with all applicable UK regulations, you can move on to the next step.

Anti-money laundering requirements

• Understand the obligations under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017
• Ensure that the Facility Agreement contains the appropriate representation and warranties from the Borrower with regard to the requirements of the Regulations
• Determine whether the Borrower needs to be registered with HMRC and ensure that the Borrower is compliant with the Regulations
• Ensure that the Facility Agreement contains provisions which enable the Lender to comply with the Regulations
• Ensure that the Facility Agreement states that the Borrower shall keep the Lender informed of any changes to its registration status
• Include provisions in the Facility Agreement which require the Borrower to submit to the Lender copies of the documents required to evidence the Borrower’s compliance with the Regulations

You can check this step off your list when you have ensured that the Facility Agreement contains all the necessary provisions that enable compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

Anti-bribery and corruption requirements

• Include a clause that requires both parties to comply with all applicable anti-bribery and anti-corruption laws
• Identify and agree on the type of information that may need to be disclosed in order to ensure both parties are complying with the laws
• Set out the procedure for monitoring and investigating any potential breaches of anti-bribery and corruption laws
• Outline the process for reporting any potential breaches
• Include a clause that requires both parties to notify the other in the event that either party is under investigation for bribery or corruption
• You can check this off your list and move on to the next step when you have included all the necessary clauses and information related to anti-bribery and corruption requirements in the facility agreement.

Regulatory filings

• Check whether the agreement is subject to the requirements of any other regulations, such as the Financial Services and Markets Act 2000
• Establish the necessary permissions and authorizations to allow the facility to be used
• Check the agreement with the Financial Conduct Authority and HMRC
• Ensure any associated fees or taxes are paid and that any other relevant regulatory filings have been successfully completed
• When all the necessary regulatory filings have been completed, proceed to the next step of the guide: Dispute resolution.

Dispute resolution

• Establish a process to resolve disputes quickly and efficiently.
• Consider using mediation or arbitration to resolve disputes.
• Decide which court should have jurisdiction over the contract in the event of litigation.
• Include a clause that the parties must attempt to resolve the dispute in good faith before taking legal action.
• Include a clause that any disputes must be brought within a certain time period.

Once you’ve established a dispute resolution process, you can move on to the next step of Negotiation.

Negotiation

• Identify which parties are involved in the agreement
• Meet with each party to discuss the terms of the agreement
• Negotiate any alterations to the terms of the agreement
• Make any changes to the agreement that are agreed upon
• Once all parties have agreed to the same terms, the agreement is ready to be signed
• Check that all parties have signed the agreement before moving on to the next step - mediation.

Mediation

• Have the parties involved in the dispute agree to enter into a process of mediation to resolve their differences
• Appoint a neutral third-party mediator to assist in the process
• Establish the rules for the mediation, including the cost of the mediation and the timeline for the proceedings
• Meet with the other party and mediator to discuss the dispute and see if an agreement can be reached
• If an agreement is reached, the mediator will draw up a written agreement that both parties can sign and follow
• Once the agreement is signed, the mediation will be considered complete and both parties can move on to the next step in the process

Litigation

• Research and choose the most suitable court to file a litigation case
• Prepare a claim and submit it to the court
• Serve the claim to the other party
• Monitor the progress of the case and attend court hearings as necessary
• Consider if it is feasible to reach an agreement with the other party prior to a court hearing
• Once the court has made its decision, comply with the judgement
• You can check this off your list once the judgement has been passed and the court case has been closed.

Tax implications of a facility agreement

• Identify the relevant taxes that may be applicable to the facility agreement: corporation tax, stamp duty, VAT, etc.
• Assess the risks and exposures associated with potential tax liabilities when entering into the agreement.
• Calculate the total tax liability of the facility agreement.
• Ensure that appropriate provisions are in place to manage any tax liabilities arising from the terms of the agreement.

Once you have identified the relevant taxes, assessed the risks and exposures, calculated the total tax liability and ensured appropriate provisions are in place, you can move onto the next step: ### Tax treatment of interest payments.

Tax treatment of interest payments

• Refer to the HMRC’s Tax Information and Impact Note (TIIN) for guidance on the tax treatment of interest payments and the rules for deductibility of interest.
• Check the relevant UK and EU legislation regarding tax treatment of interest payments, and consider any changes that may need to be made to the facility agreement.
• Ensure the facility agreement includes clauses for the payment of taxes on interest payments, as well as any other relevant taxes, such as stamp duty.
• When the tax treatment of interest payments has been clarified and the relevant clauses added to the facility agreement, this step can be checked off the list.

Tax treatment of principal payments

• Determine the tax treatment of principal payments.
• Determine whether these payments will be subject to tax.
• If they are not subject to tax, this should be stated in the Facility Agreement.
• If the principal payments are subject to tax, the parties should agree on who is responsible for paying the tax.
• Ensure that payments, taxes, and any other applicable fees are adequately provided for in the Facility Agreement.

Once these points have been accounted for and agreements have been made, this step is complete and you can move on to the next step: Termination of the Facility Agreement.

Termination of the facility agreement

• Check the terms of the facility agreement to determine the conditions required for termination
• Make sure that all conditions have been fulfilled before termination can be completed
• In some cases, written notice must be provided to the lender before the termination can take effect
• Once all conditions are met, the facility agreement will terminate and any outstanding amounts must be repaid

You’ll know that you can check this off your list and move on to the next step when you have fulfilled all conditions for termination and the facility agreement has been terminated.

Voluntary termination

• Notify the lender in writing that you wish to voluntarily terminate the facility agreement
• Make sure that all funds have been repaid to the lender in full
• Ensure that the lender has been given access to the security that was taken as part of the facility agreement
• Obtain written acknowledgement from the lender that the facility agreement has been terminated and all funds have been repaid
• When you have received written confirmation from the lender that the facility agreement has been terminated, then you can check this step off your list and move on to the next step of Involuntary termination.

Involuntary termination

• Draft a clause on involuntary termination, including the grounds for such a termination and the notice period required
• Include a clause stating that the agreement may be terminated due to either party’s breach of their obligations
• Include a clause stating that the terminating party must provide written notice of their intention to terminate
• Include a clause setting out the consequences for the terminating party should they fail to provide written notice
• When you have drafted the necessary clauses and included them in the facility agreement, you can check this off your list and move on to the next step.

Consequences of termination

• Inform the other party in writing of the termination, including the details of the agreement and the date of termination
• Outline the consequences for the other party in the event that the terms of the agreement are not fulfilled
• Include any clauses related to the payment of compensation, liquidated damages, and/or termination fees
• Specify any obligations of the other party that will continue to apply following termination
• Identify any ownership or intellectual property rights that will continue to apply following termination

You can check this off your list and move on to the next step when you have included all of the above details in your facility agreement.

FAQ

Q: How is a Facility Agreement (UK) different from one used in the United States or Europe?

Asked by Michael on 3rd April 2022.
A: A Facility Agreement (UK) is a contract which outlines the terms and conditions of a loan between a lender and borrower. Although the concept of a Facility Agreement is similar in all jurisdictions, the terminology, clauses, and governing laws may differ depending on the jurisdiction. For example, while the US and Europe generally use the term “Promissory Note”, UK law uses “Loan Agreement” instead. Additionally, while US/European law often requires certain clauses to be included in a Facility Agreement, UK law does not necessarily have the same requirements. Therefore, it is important to ensure that any Facility Agreement you create adheres to the jurisdiction(s) you are dealing with.

Q: Is there a standard format for creating a Facility Agreement (UK)?

Asked by John on 8th June 2022.
A: Generally speaking, there is no one-size-fits-all format for creating a Facility Agreement (UK). However, there are some standard elements which should be included in any Facility Agreement created in the UK. These include an agreement between the lender and borrower; details of the loan including amount, interest rate, repayment terms and security; and clauses outlining potential events such as default or termination. Additionally, it is important to make sure that any legal requirements are adhered to when creating a Facility Agreement (UK), such as including certain clauses or signing off on certain documents.

Q: What should be included in a Facility Agreement (UK) if I am working in the technology industry?

Asked by Emma on 20th September 2022.
A: If you are working in the technology industry, there are some specific elements which should be included in your Facility Agreement (UK). For example, it is important to include detailed information regarding intellectual property rights, data protection rules and laws as well as any specific terms related to software development or usage of technology products. Additionally, it is also important to include clauses regarding confidentiality and non-compete agreements which protect both parties from potential misuse or abuse of proprietary information or technology products. Finally, it is important to ensure that all clauses adhere to relevant UK laws and regulations for technology businesses.

Q: What should I consider when negotiating a Facility Agreement (UK)?

Asked by David on 28th October 2022.
A: When negotiating a Facility Agreement (UK), it is important to consider both parties’ interests and needs. This includes ensuring that any terms or conditions outlined in the agreement are fair and reasonable for both parties involved. It also includes ensuring that any legal requirements are met with regard to local legislation and regulations as well as any industry specific regulations which may apply. Additionally, it is important to ensure that all parties fully understand their respective rights and obligations under the agreement before signing off on it. Finally, it is also important to be aware of any potential risks associated with the agreement so that these can be addressed during negotiations if necessary.

Example dispute

Suing a Company for Breach of Facility Agreement

• Plaintiff must prove that the company breached a facility agreement by not fulfilling its contractual obligations.
• The plaintiff must identify the specific contractual provision that was breached by the company.
• The plaintiff must show that the breach caused them harm and that the harm was foreseeable at the time of signing the agreement.
• The plaintiff must provide evidence of the damages they have suffered as a result of the breach.
• The plaintiff can seek damages, or they may seek a court order requiring the company to comply with the terms of the facility agreement.
• The plaintiff may also be able to seek legal fees and costs associated with bringing the lawsuit.
• The court may also award punitive damages to the plaintiff if the breach was particularly egregious.

Templates available (free to use)

Amended And Restated Agreement Loan Or Facility Agreement
Facility Agreement
Facility Agreement Bilateral Loan Agreement
Facility Agreements
Letter Of Credit Facility Agreement
Loan Facility Agreement
Mezzanine Facility Agreement
Murabaha Facility Agreement
Revolving Credit Facility Agreement
Secured Facility Agreement For Management Buyouts
Syndicated Facility Agreement
Term Loan Facility Agreement

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