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Equity Loan Agreement for India

Equity Loan Agreement Template for India

A comprehensive legal agreement governed by Indian law that establishes the terms and conditions for a loan facility secured by equity shares or securities. The document details the loan amount, interest rates, security creation through share pledge, maintenance of security cover, rights and obligations of parties, events of default, and enforcement mechanisms. It incorporates provisions compliant with Indian securities laws, banking regulations, and corporate laws, particularly focusing on SEBI regulations regarding share pledges and the Companies Act requirements for creating security interests over shares.

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Equity Loan Agreement

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What is a Equity Loan Agreement?

The Equity Loan Agreement serves as a critical financing instrument in the Indian market, enabling borrowers to leverage their shareholding in companies to obtain funding. This document is typically used when shareholders, whether promoters or investors, seek to raise funds against their equity holdings without immediately divesting their ownership. The agreement must comply with various Indian regulatory frameworks, including SEBI regulations, banking laws, and the Companies Act, 2013. It covers crucial aspects such as loan terms, security margin requirements, top-up provisions, voting rights during the security period, and enforcement mechanisms in case of default. The document is particularly important in corporate financing scenarios where shares serve as the primary collateral, requiring careful consideration of market volatility and regulatory restrictions on share pledges.

What sections should be included in a Equity Loan Agreement?

1. Parties: Identification of the lender and borrower with complete details including registration numbers and registered addresses

2. Background: Context of the loan arrangement, purpose, and basic transaction structure

3. Definitions and Interpretation: Definitions of key terms used in the agreement and rules of interpretation

4. Loan Facility: Details of the loan amount, purpose, and drawdown conditions

5. Interest and Fees: Interest rate, calculation method, payment dates, and applicable fees

6. Security Creation: Provisions for creating charge over equity shares, pledge arrangements, and margin requirements

7. Representations and Warranties: Standard and transaction-specific representations by the borrower

8. Covenants: Positive and negative obligations of the borrower during the loan term

9. Conditions Precedent: Conditions to be satisfied before loan disbursement

10. Events of Default: Circumstances constituting default and consequences thereof

11. Rights and Remedies: Lender's rights upon default, including share enforcement mechanisms

12. Payment Mechanics: Payment procedures, accounts, and currency provisions

13. Notices: Communication methods and contact details for notices

14. Governing Law and Jurisdiction: Choice of law and dispute resolution mechanisms

15. Miscellaneous: Standard boilerplate provisions including amendments, assignments, and severability

What sections are optional to include in a Equity Loan Agreement?

1. Multiple Lenders: Required when there are multiple lenders, including facility agent provisions

2. Security Margin and Top-up: Detailed provisions for maintaining security cover and top-up requirements

3. Additional Security: When additional security beyond shares is being provided

4. Guarantees: When personal or corporate guarantees are part of the security package

5. Special Voting Rights: When lender requires specific voting rights in relation to pledged shares

6. Share Retention: Restrictions on promoter shareholding and transfer

7. Multiple Drawdown Provisions: For facilities with multiple tranches or drawdown options

8. Tax Provisions: Detailed tax clauses when complex tax implications are involved

9. Control Rights: Special rights of lender regarding company management during loan period

What schedules should be included in a Equity Loan Agreement?

1. Schedule 1 - Security Details: Details of shares being pledged including share certificate numbers, DP IDs

2. Schedule 2 - Condition Precedent Documents: List of documents required before disbursement

3. Schedule 3 - Form of Drawdown Notice: Standard format for requesting loan disbursement

4. Schedule 4 - Calculation of Interest: Detailed methodology for interest calculation

5. Schedule 5 - Form of Security Documents: Forms of share pledge agreement and power of attorney

6. Schedule 6 - Repayment Schedule: Detailed repayment timeline and amounts

7. Schedule 7 - Company Resolutions: Format of corporate authorizations required

8. Schedule 8 - Form of Compliance Certificate: Standard format for periodic compliance reporting

9. Appendix A - Know Your Customer Requirements: List of KYC documents required from borrower

10. Appendix B - Fee Schedule: Detailed breakdown of all applicable fees and charges

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

India

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions
















































Clauses


































Relevant Industries

Banking and Financial Services

Investment Banking

Private Equity

Corporate Finance

Asset Management

Securities Trading

Infrastructure

Real Estate

Manufacturing

Technology

Telecommunications

Healthcare

Energy

Professional Services

Relevant Teams

Legal

Finance

Treasury

Risk Management

Compliance

Corporate Secretarial

Credit

Investment Banking

Corporate Finance

Portfolio Management

Documentation

Due Diligence

Relevant Roles

Chief Financial Officer

Finance Director

Legal Counsel

Corporate Lawyer

Investment Banker

Credit Manager

Risk Manager

Compliance Officer

Company Secretary

Treasury Manager

Portfolio Manager

Relationship Manager

Security Trustee

Loan Officer

Due Diligence Officer

Corporate Finance Manager

Investment Analyst

Legal Document Specialist

Industries









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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