The Guarantee Facility Agreement is a crucial document in Indian banking and commercial practice, used when a business requires a bank or financial institution to provide guarantees to third parties. These guarantees may be required for various purposes such as bid bonds, performance guarantees, or financial guarantees. The agreement establishes the framework under which multiple guarantees can be issued up to an agreed facility limit, specifying the rights and obligations of all parties involved. It ensures compliance with Indian banking regulations, particularly RBI guidelines on bank guarantees, and includes provisions for security, enforcement, and dispute resolution under Indian law. The document is essential for businesses engaging in contracts requiring bank guarantees and for financial institutions managing their guarantee portfolio risks.
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1. Parties: Identification of the guarantor, beneficiary, and principal debtor
2. Background: Context of the guarantee facility, underlying relationship, and purpose
3. Definitions and Interpretation: Key terms, construction rules, and interpretation principles
4. Facility Details: Scope, amount, and nature of the guarantee facility
5. Conditions Precedent: Prerequisites for facility effectiveness and issuance of guarantees
6. Issuance Mechanism: Procedures and requirements for requesting and issuing guarantees
7. Fees and Costs: Commission, charges, and payment terms
8. Representations and Warranties: Standard and specific declarations by the parties
9. Undertakings: Ongoing obligations of the parties
10. Events of Default: Circumstances constituting default and consequences
11. Indemnity and Reimbursement: Terms for reimbursement and indemnification obligations
12. Payment Mechanics: Payment procedures, timing, and currency provisions
13. Changes to Parties: Assignment and transfer provisions
14. Notices: Communication procedures and contact details
15. Governing Law and Jurisdiction: Choice of law and dispute resolution mechanisms
1. Security Provisions: Required when the facility is secured by collateral or third-party security
2. Counter Guarantee: Needed when there is a back-to-back guarantee arrangement
3. Multiple Guarantor Provisions: Required when there are multiple guarantors providing joint or several guarantees
4. Currency Provisions: Necessary for cross-border or multi-currency guarantee facilities
5. Digital/Electronic Issuance: Required when guarantees can be issued electronically
6. Agent Provisions: Needed when there is a facility agent managing multiple beneficiaries
7. Step-in Rights: Required in project finance or complex commercial arrangements
1. Guarantee Facility Terms: Detailed terms including limits, sub-limits, and pricing
2. Form of Guarantee Request: Standard format for requesting issuance of guarantees
3. Form of Guarantee: Template(s) for the guarantee instrument(s)
4. Conditions Precedent Documents: List of required documents and conditions
5. Security Documents: Forms and details of security arrangements if applicable
6. Fee Schedule: Detailed breakdown of fees, charges, and commission
7. Authorized Signatories: List of persons authorized to request guarantees
8. Notice Details: Contact information and address details of all parties
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