The Intercompany Subordination Agreement is essential in complex corporate structures operating under Philippine jurisdiction where multiple levels of debt exist within a corporate group. This document is typically used when a company or group of companies has both senior external debt (such as bank loans or bonds) and intercompany loans or other subordinated debt. It establishes clear priorities between different classes of debt, ensures orderly payment structures, and protects senior creditors' interests. The agreement becomes particularly crucial in scenarios of corporate restructuring, refinancing, or when implementing new group financing arrangements. It must comply with Philippine corporate law, banking regulations, and insolvency legislation, while providing practical mechanisms for debt subordination and payment restrictions.
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1. Parties: Identifies all parties to the agreement, including the senior creditors, subordinated creditors, and the debtor company
2. Background: Explains the context of the agreement, existing debt arrangements, and the purpose of the subordination
3. Definitions: Defines key terms used throughout the agreement, including Senior Debt, Subordinated Debt, Enforcement Action, etc.
4. Subordination: Core section establishing the subordination of specified debt and payments to senior debt
5. Turnover of Proceeds: Provisions regarding the handling of any payments received in violation of the subordination
6. Restrictions on Subordinated Creditors: Limitations on actions subordinated creditors can take regarding their debt
7. Payment Conditions: Conditions under which payments on subordinated debt can be made
8. Representations and Warranties: Standard representations by all parties regarding their capacity and authority
9. Enforcement Rights: Rights of senior creditors to enforce the subordination provisions
10. Duration: Term of the subordination agreement and conditions for termination
11. Governing Law and Jurisdiction: Specifies Philippine law as governing law and jurisdiction for disputes
12. Miscellaneous: Standard boilerplate provisions including notices, amendments, and severability
1. Security Arrangements: Include when the subordination agreement needs to address existing or future security interests
2. Intercreditor Provisions: Required when there are multiple senior creditors who need to establish their relative rights
3. Additional Subordinated Creditor Accession: Include when new subordinated creditors may join the agreement in the future
4. Bankruptcy and Insolvency Provisions: Detailed provisions for insolvency scenarios, particularly relevant for high-risk debtors
5. Amendment Procedures: Detailed procedures for making changes to the agreement, necessary for complex multi-party arrangements
6. Payment Blockage Provisions: Specific mechanisms for blocking payments in certain circumstances, relevant for complex debt structures
1. Schedule of Existing Senior Debt: Details of all senior debt covered by the agreement, including amounts and key terms
2. Schedule of Subordinated Debt: Details of all subordinated debt covered by the agreement, including amounts and key terms
3. Form of Accession Deed: Standard form for new subordinated creditors to join the agreement
4. Notice Details: Contact information and notice requirements for all parties
5. Corporate Authorizations: Copies of relevant corporate approvals and authorizations
6. Payment Waterfall: Detailed breakdown of payment priorities and distribution mechanics
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