This Loan Agreement – Pari Passu Ranking offers flexibility in that the parties involved can be individuals or businesses. In other words this Loan Agreement can be used for a loan to a business by another business or individual, and it can also be used for a loan to an individual by another individual.

This comprehensive Loan Agreement template records the terms and conditions of an agreement between two parties under which the Lender lends to the Borrower a specific sum of money over a defined period of time. This Agreement also contains provisions allowing the parties to decide whether the loan is to be guaranteed by a third party (the Guarantor) and whether the loan is either secured or unsecured.

A Loan Agreement with Guarantor provides more security to the Lender that the loan will be repaid since the Guarantor will guarantee payment on behalf of the Borrower.

This Agreement can be used to formalise different types of loans including large commercial loans. It contains a number of clauses covering the breakdown of the loan and interest charges, repayment conditions, representations and warranties, undertakings and provisions in the event of the borrower's default. Please note that the Agreement allows the Borrower to repay the loan and interest within a specified time but the Borrower can also repay the loan and interest at any time by giving notice in writing to the Lender.

This Loan Agreement – Pari Passu Ranking contains a Pari Passu clause which prevents the borrower from incurring obligations to other creditors that rank legally senior to the loan agreement containing the clause. Pari Passu means 'equal footing' thus, the purpose of the Pari Passu clause is to ensure that the borrower does not have, nor will it subsequently create, a class of creditors whose claims against the borrower will rank legally senior to the indebtedness represented by the loan agreement. In other words, with a Pari Passu clause the lender’s objective is to ensure that its loan is not subordinated to another lender on insolvency.

The Pari Passu clause requires the borrower to ensure that the lender’s rights under the loan agreement will, at all times, rank at least equally with all of the borrower's other unsecured and unsubordinated obligations so that the lender’s share of the borrower's assets in the event of its liquidation will be equal to that of all other unsecured and unsubordinated creditors.

Please note that the Pari Passu clause applies even in secured facilities notwithstanding that is refers to unsecured indebtedness. It is an assurance that the lender’s rights will, if the security fails, rank Pari Passu (equally) with the rights of the borrower’s unsecured creditors and the clause applies to existing as well as future obligations. Its relevance comes if there is a shortfall in the security on enforcement or if the security is for any reason defective.

As every loan is different and there is no standard loan agreement template that fits all loans, this Agreement has been drafted taking into account the flexible nature of the transaction. It can be edited to suit the particular circumstances and needs of the parties, and it is flexible for loans of any size and repayment terms of any complexity.

N.B.  A Loan Agreement only defines the terms and conditions of a loan; in order to create security for the sum borrowed a separate agreement is also required. A Debenture is a document creating security; it secures a loan using the borrower's assets.

This Loan Agreement – Pari Passu Ranking is comprehensive, legally binding and up to date with UK law.  

Please note that this Loan Agreement is not suitable for companies in the business of lending or providing credit to consumers as it is not regulated by the Consumer Credit Act 1974.

This Loan Agreement – Pari Passu Ranking contains the following clauses:

1. Definitions and Interpretation
2. Conditions Precedent
3. Loan
4. Purpose
5. Drawings
6. Interest
7. Repayment
8. Prepayment
9. Guarantee
10. Representations and Warranties
11. Undertakings
12. Insurance
13. Events of Default
14. Costs
15. Payments
16. Pari Passu Ranking
17. Set-off
18. Notices
19. Confidential Information
20. Entire Agreement
21. Severance
22. Waiver
23. Rights of Third Parties
24. Variation
25. Assignment
26. Further assurance
27. Governing Law and Jurisdiction

SCHEDULE 1

SCHEDULE 2

This Loan Agreement – Pari Passu Ranking is in Microsoft Word format, written in plain English, easy to use and edit.