The Profit Sharing Loan Agreement is a specialized financing instrument used in South Africa when parties wish to structure a loan where returns are linked to the borrower's business performance rather than fixed interest rates. This type of agreement is particularly useful for businesses seeking alternative financing options or in situations where Shariah-compliant financing is required. It includes detailed mechanisms for profit calculation and sharing, reporting requirements, and security arrangements, all compliant with South African legislation including the National Credit Act, Companies Act, and Financial Sector Regulation Act. The agreement is commonly used in growth financing, business expansion projects, and joint venture arrangements where the lender seeks to participate in the borrower's business success while maintaining creditor status.
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1. Parties: Identification and details of the Lender and Borrower
2. Background: Context of the agreement, relationship between parties, and purpose of the loan
3. Definitions and Interpretation: Definitions of key terms and interpretation rules for the agreement
4. Loan Amount and Disbursement: Specification of the loan amount, disbursement conditions and procedure
5. Profit Sharing Mechanism: Detailed explanation of how profits will be calculated, shared and paid
6. Term and Repayment: Duration of the loan and terms of repayment including profit share payments
7. Interest and Fees: Any additional interest or fees applicable, ensuring compliance with usury laws
8. Security: Details of any security or collateral provided for the loan
9. Representations and Warranties: Standard representations and warranties from both parties
10. Borrower's Covenants: Ongoing obligations of the Borrower including financial reporting and business conduct
11. Events of Default: Circumstances constituting default and consequences thereof
12. Remedies: Rights and remedies available to parties in case of default or breach
13. Boilerplate Clauses: Standard legal provisions including notices, governing law, jurisdiction
1. Guarantees: Required when there is a third-party guarantor for the loan
2. Additional Parties: Needed when involving multiple lenders or borrowers
3. Subordination: Required when the loan needs to be subordinated to other debt
4. Currency Provisions: Necessary for cross-border transactions involving multiple currencies
5. Tax Gross-Up: Required when tax implications need specific handling
6. Assignment and Transfer: Needed when parties want to allow transfer of rights under the agreement
7. Step-In Rights: Required when lender needs right to take control in specific circumstances
1. Schedule 1 - Loan Details: Detailed breakdown of loan amount, profit sharing percentages, and payment dates
2. Schedule 2 - Conditions Precedent: List of conditions to be satisfied before loan disbursement
3. Schedule 3 - Calculation of Profit Share: Detailed formula and methodology for calculating profit share
4. Schedule 4 - Form of Drawdown Notice: Template for requesting loan disbursement
5. Schedule 5 - Reporting Requirements: Templates and requirements for financial reporting
6. Schedule 6 - Security Documents: List and copies of security documents if applicable
7. Appendix A - Profit Verification Procedure: Agreed procedure for verifying profit calculations
8. Appendix B - Compliance Certificates: Templates for periodic compliance certification
Relevant legal definitions
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Relevant Industries
Financial Services
Mining
Manufacturing
Technology
Real Estate
Agriculture
Retail
Construction
Healthcare
Energy
Telecommunications
Professional Services
Relevant Teams
Legal
Finance
Treasury
Risk Management
Compliance
Corporate Development
Accounting
Credit
Commercial
Executive Leadership
Relevant Roles
Chief Financial Officer
Finance Director
Legal Counsel
Corporate Lawyer
Financial Controller
Treasury Manager
Risk Manager
Compliance Officer
Investment Manager
Business Development Director
Company Secretary
Accountant
Financial Analyst
Credit Manager
Commercial Director
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