Document background
The Negative Pledge Agreement is a fundamental protective instrument in Belgian financial transactions, commonly used in unsecured lending arrangements, bond issuances, and general corporate financing. This document becomes essential when lenders provide unsecured facilities but wish to maintain the borrower's asset base free from other security interests. The agreement's primary purpose is to prevent the borrower from granting security over its assets to other creditors, thereby maintaining the lender's position regarding the borrower's unencumbered assets. Under Belgian law, the agreement must be carefully structured to ensure enforceability and compliance with local security and financial collateral regulations. It typically contains detailed provisions on scope, permitted security, monitoring obligations, and enforcement mechanisms.
