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Debt Assumption Agreement Template for England and Wales

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Key Requirements PROMPT example:

Debt Assumption Agreement

"Need a Debt Assumption Agreement where our subsidiary company (NewCo Ltd) will take over a ?????????5 million loan from our parent company (ParentCo plc), with the transfer to be effective from 1 March 2025, and Barclays Bank as the creditor has already provided consent."

What is a Debt Assumption Agreement?

The Debt Assumption Agreement is a crucial document in English and Welsh law used when one party needs to take over the debt obligations of another. This agreement is commonly employed in corporate restructurings, business acquisitions, and group reorganizations. It outlines the specific terms and conditions under which the new debtor assumes the existing debt, including payment schedules, security arrangements, and any associated warranties. The document ensures legal certainty for all parties involved and typically requires careful consideration of existing loan documentation and creditor rights. It's particularly important in scenarios where debt needs to be transferred while maintaining existing security arrangements and creditor relationships.

What sections should be included in a Debt Assumption Agreement?

1. Parties: Identifies and defines all parties to the agreement including the original debtor, new debtor, and creditor

2. Background: Sets out the context of the existing debt and the intention to transfer obligations to the new debtor

3. Definitions: Defines key terms used throughout the agreement including Assumed Debt, Effective Date, and Security

4. Debt Assumption: Core provisions regarding the assumption of debt obligations and mechanics of the transfer

5. Payment Terms: Terms and conditions of debt repayment including amount, interest, and payment schedule

6. Representations and Warranties: Statements of fact and assurances from all parties regarding their capacity and authority

7. Governing Law and Jurisdiction: Specifies English and Welsh law as governing law and relevant courts for dispute resolution

What sections are optional to include in a Debt Assumption Agreement?

1. Security Provisions: Required when debt is secured against assets, detailing the transfer or creation of new security arrangements

2. Conditions Precedent: Specific conditions that must be satisfied before the debt assumption becomes effective

3. Original Debtor Release: Provisions specifying the extent to which the original debtor is released from obligations

4. Creditor Consent: Provisions regarding the requirement for and implementation of creditor approval

What schedules should be included in a Debt Assumption Agreement?

1. Schedule 1 - Details of Assumed Debt: Comprehensive breakdown of the debt being assumed including principal, interest, and other charges

2. Schedule 2 - Payment Schedule: Detailed repayment terms, dates, and amounts for the assumed debt

3. Schedule 3 - Security Documents: Details of any security arrangements associated with the debt

4. Schedule 4 - Form of Creditor Consent: Template or copies of creditor approvals where required for the assumption

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈ˰æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions



































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Industries

Law of Property Act 1925: Key legislation for secured debts and the transfer of legal and equitable interests in property. Essential for debt assumption agreements involving secured debts.

Contracts (Rights of Third Parties) Act 1999: Governs how third parties (particularly creditors) can enforce contractual terms, which is crucial in debt assumption as it inherently involves third party rights.

Companies Act 2006: Regulates corporate authority provisions, directors' duties, and corporate benefit considerations when companies are involved in debt assumption agreements.

Statute of Frauds 1677: Historic legislation requiring certain contracts to be in writing, particularly relevant for guarantees and security interests in debt agreements.

Insolvency Act 1986: Addresses the treatment of debt transfers in insolvency scenarios and protections for creditors in debt assumption situations.

Consumer Credit Act 1974: Provides consumer protection provisions and regulations for debt assumptions involving consumer credit arrangements.

Financial Services and Markets Act 2000: Regulatory framework for financial activities, including compliance requirements for debt assumptions involving regulated financial activities.

Common Law Novation Principles: Legal principles governing the substitution of a new contract in place of an existing one, fundamental to debt assumption agreements.

Assignment Principles: Legal principles governing the transfer of rights and obligations, essential for understanding the mechanism of debt transfer.

Contract Law Consideration Requirements: Fundamental contract law principles requiring exchange of value for valid contracts, applicable to debt assumption agreements.

Equitable Principles: Principles of equity governing the fair and just transfer of obligations in debt assumption scenarios.

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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