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Subordinated Promissory Note for the United Kingdom

Subordinated Promissory Note Template for England and Wales

A Subordinated Promissory Note is a legally binding debt instrument under English and Welsh law where one party (the maker) promises to pay a specified sum to another party (the payee), with the distinct characteristic that the debt is subordinate to other specified debts of the maker. The document includes payment terms, interest rates, subordination provisions, and typically ranks behind senior debt in priority of payment, particularly in insolvency scenarios.

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Subordinated Promissory Note

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What is a Subordinated Promissory Note?

A Subordinated Promissory Note is commonly used in complex financing arrangements where parties need to establish clear priority rankings among different debts. Under English and Welsh law, this document creates a legally enforceable promise to pay that is specifically ranked below other designated debts in priority of payment. The note typically includes detailed terms about payment schedules, interest calculations, events of default, and critically, the specific subordination provisions that define its ranking relative to other debts. This instrument is particularly useful in corporate restructuring, acquisition financing, or when companies need to create layered debt structures while maintaining clear priority rankings.

What sections should be included in a Subordinated Promissory Note?

1. Parties: Identification of maker (borrower) and payee (lender)

2. Promise to Pay: Unconditional promise to pay a specified sum with clear payment terms

3. Principal Amount: Specification of the loan amount and currency

4. Interest: Interest rate, calculation method, and payment frequency

5. Subordination Provisions: Terms specifying the subordination to senior debt and treatment in insolvency

6. Payment Terms: Repayment schedule, method of payment, and place of payment

7. Events of Default: Circumstances constituting default and consequences

8. Representations and Warranties: Standard representations regarding capacity, authority, and enforceability

9. Governing Law: Specification of English and Welsh law as governing law

What sections are optional to include in a Subordinated Promissory Note?

1. Security: Details of any collateral or security interests (if the note is secured)

2. Guarantees: Terms of any third-party guarantees supporting the note

3. Transfer Provisions: Terms governing assignability and transferability of the note

4. Tax Provisions: Provisions dealing with withholding tax and other tax implications

5. Prepayment Terms: Optional provisions regarding early repayment rights and penalties

What schedules should be included in a Subordinated Promissory Note?

1. Payment Schedule: Detailed amortization schedule showing payment dates and amounts

2. Senior Debt Schedule: List and details of senior debt to which this note is subordinated

3. Form of Notice: Standard form for any required notices under the note

4. Security Details: Detailed description of any security or collateral (if applicable)

Authors

Alex Denne

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

Jurisdiction

England and Wales

Document Type

Promissory Note

Sector

Banking

Cost

Free to use
Relevant legal definitions




















Clauses





















Industries

Bills of Exchange Act 1882: Primary legislation governing negotiable instruments including promissory notes. Defines core requirements for valid promissory notes and establishes the rights and obligations of parties involved.

Consumer Credit Act 1974: Applicable if the note involves consumer lending. Sets out regulatory requirements and protections for consumer credit agreements.

Financial Services and Markets Act 2000: Establishes regulatory framework for financial activities. Relevant if the promissory note is considered a specified investment or part of regulated financial activities.

Insolvency Act 1986: Critical for subordination provisions, determining creditor rankings, and treatment of the note in insolvency proceedings.

Companies Act 2006: Relevant when corporate parties are involved. Covers corporate capacity, authority, directors' duties, and registration requirements.

Law of Property Act 1925: Applicable if security interests are involved in the note. Governs property-related aspects of the agreement.

FCA Regulations: Financial Conduct Authority regulations that may apply if the note falls under regulated activities, including compliance requirements.

PRA Requirements: Prudential Regulation Authority requirements, particularly relevant if the note involves regulated financial institutions and capital adequacy considerations.

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, 聽Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination, 聽Severance Pay, Governing Law, Entire Agreemen

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