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Negotiating Lender Friendly Terms
Summary
The no litigation clause ensures borrowers disclose any legal actions that could impact their financial health, protecting lenders. The material adverse effect clause, often contested by borrowers, allows lenders to act if the borrowers condition worsens. To negotiate beneficial terms for lenders, consider transparency clauses, regular updates, and clearly defined material adverse effects. Fairness involves balancing lender protection with reasonable borrower obligations.Full Conversation
term *: no litigation: except as disclosed in writing to the Lender and waived in
writing by the Lender, no litigation or administrative or other proceedings
before, or of, any court or governmental authority or agency or other
tribunal have, to the knowledge of the Borrower, been initiated or
threatened against the Borrower or any of the Borrower’s assets which
would or might have a Material Adverse Effect upon the business, assets
or financial condition of the Borrower;
The term "no litigation" in a legal context like this generally means:
- No Litigation: The borrower is affirming that there are no current or threatened legal actions, administrative proceedings, or other disputes involving the borrower or their assets. Any such issues must be disclosed and waived by the lender. If undisclosed, these could negatively impact the borrower's business or financial condition.
If you have another term you'd like clarified, feel free to share!
- No Litigation: The borrower is affirming that there are no current or threatened legal actions, administrative proceedings, or other disputes involving the borrower or their assets. Any such issues must be disclosed and waived by the lender. If undisclosed, these could negatively impact the borrower's business or financial condition.
If you have another term you'd like clarified, feel free to share!
Term *: no litigation: no litigation or administrative or other proceedings have
been initiated or threatened against the Borrower or any of the Borrower’s
assets which, if adversely determined, would have a material adverse
effect in the Lender’s reasonable opinion upon the Borrower’s ability to
perform its obligations under this Agreement or the facility.
The term "no litigation" in both contexts revolves around the borrower's assurance regarding legal actions:
- Term *: The borrower confirms no litigation, except disclosed and waived by the lender, that could materially impact the borrower's business or financial condition.
- Term *: The borrower confirms no litigation that, if negatively determined, would materially affect their ability to meet obligations under the agreement, based on the lender’s reasonable opinion.
In essence, both terms require the borrower to confirm the absence of legal proceedings that could significantly affect their financial or operational capabilities, with slight differences in focus.
- Term *: The borrower confirms no litigation, except disclosed and waived by the lender, that could materially impact the borrower's business or financial condition.
- Term *: The borrower confirms no litigation that, if negatively determined, would materially affect their ability to meet obligations under the agreement, based on the lender’s reasonable opinion.
In essence, both terms require the borrower to confirm the absence of legal proceedings that could significantly affect their financial or operational capabilities, with slight differences in focus.
my client is a lender, how can I negotiate a term which is beneficial to them but within the ethical guidelines of ASIC
Case Rating: *
To negotiate a beneficial term for your client (the lender) while adhering to ASIC's ethical guidelines, consider these strategies:
- Transparency Clause: Require borrowers to provide full disclosure of any potential litigation.
- Regular Updates: Include a clause for periodic updates on the borrower's financial condition and legal standing.
- Material Adverse Effect: Define what constitutes a Material Adverse Effect clearly, based on the lender's reasonable opinion.
These strategies help protect the lender while ensuring compliance with ASIC guidelines.
To negotiate a beneficial term for your client (the lender) while adhering to ASIC's ethical guidelines, consider these strategies:
- Transparency Clause: Require borrowers to provide full disclosure of any potential litigation.
- Regular Updates: Include a clause for periodic updates on the borrower's financial condition and legal standing.
- Material Adverse Effect: Define what constitutes a Material Adverse Effect clearly, based on the lender's reasonable opinion.
These strategies help protect the lender while ensuring compliance with ASIC guidelines.
consider this definition which the borrower party struck out: Material Adverse Effect means, in respect of a person, a material adverse
effect on:
its business, property, operations or condition (financial or otherwise) of the Borrower; or
its ability to comply with its obligations under any Finance Document; or
the value of the Security or the priority or effectiveness of any Security;
the legality, validity or enforceability of the Agreement or any Security; or
the rights or remedies of the Lender under the Agreement or any Security,
as determined in the Lender’s opinion.
Case Rating: *
The definition of "Material Adverse Effect" is typically struck out by borrowers when they feel the term is too broad or potentially unfavorable, as it gives lenders significant discretion. To negotiate a beneficial term for the lender, consider:
- Clarifying Scope: Narrow down what specifically constitutes a material adverse effect.
- Objective Standards: Use objective criteria or benchmarks to determine material adverse effects.
- Negotiation: Suggest including a mutual agreement clause for defining adverse effects.
Would you like further guidance on this negotiation process or any other aspect?
The definition of "Material Adverse Effect" is typically struck out by borrowers when they feel the term is too broad or potentially unfavorable, as it gives lenders significant discretion. To negotiate a beneficial term for the lender, consider:
- Clarifying Scope: Narrow down what specifically constitutes a material adverse effect.
- Objective Standards: Use objective criteria or benchmarks to determine material adverse effects.
- Negotiation: Suggest including a mutual agreement clause for defining adverse effects.
Would you like further guidance on this negotiation process or any other aspect?
explain my proposed terms and its implications, is it fair?
Case Rating: *
Your proposed terms aim to protect the lender's interests by ensuring transparency and accountability from the borrower. Here's a summary of the implications:
- No Litigation Clause: Protects the lender by requiring disclosure of legal issues that could impact the borrower’s financial health or ability to fulfill obligations.
- Material Adverse Effect: If struck out by the borrower, could limit the lender’s ability to act if the borrower's condition worsens.
Fairness depends on balancing protection for the lender while being reasonable and not overly restrictive for the borrower. Consider clarifying the scope and using objective standards for "Material Adverse Effect".
Your proposed terms aim to protect the lender's interests by ensuring transparency and accountability from the borrower. Here's a summary of the implications:
- No Litigation Clause: Protects the lender by requiring disclosure of legal issues that could impact the borrower’s financial health or ability to fulfill obligations.
- Material Adverse Effect: If struck out by the borrower, could limit the lender’s ability to act if the borrower's condition worsens.
Fairness depends on balancing protection for the lender while being reasonable and not overly restrictive for the borrower. Consider clarifying the scope and using objective standards for "Material Adverse Effect".
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