The Subsidiary Loan Agreement is a crucial document used when a parent company provides financing to its subsidiary in Saudi Arabia. This agreement must be structured in compliance with both Saudi Arabian law and Sharia principles, making it distinct from conventional loan agreements used in other jurisdictions. It is typically used for corporate group financing, expansion projects, working capital requirements, or restructuring purposes. The document addresses specific Saudi regulatory requirements, including those from the Saudi Central Bank (SAMA) and Ministry of Commerce. A Subsidiary Loan Agreement includes detailed provisions for the facility amount, profit calculation methods, security arrangements, and parent company support mechanisms, while ensuring all financing structures remain Sharia-compliant.
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1. Parties: Identification of the lender (typically parent company) and borrower (subsidiary), including full legal names and registration details
2. Background: Context of the loan, relationship between parties, and purpose of the facility
3. Definitions and Interpretation: Key terms used in the agreement, including Sharia-compliant financing concepts
4. Facility: Details of the loan amount, purpose, and Sharia-compliant profit structure
5. Conditions Precedent: Requirements to be satisfied before drawdown, including regulatory approvals
6. Drawdown: Procedures and requirements for utilizing the loan facility
7. Repayment and Prepayment: Terms for repayment, including schedule and early payment provisions
8. Profit Rate and Fees: Sharia-compliant profit rate structure and associated fees
9. Representations and Warranties: Statements of fact and assurances from the subsidiary
10. Covenants: Positive and negative obligations of the subsidiary
11. Events of Default: Circumstances constituting default and consequences
12. Security: Details of security arrangements and guarantees
13. Payments: Payment mechanics, currency, and tax provisions
14. Changes to Parties: Rules regarding assignment and transfer
15. Governing Law and Jurisdiction: Saudi Arabian law as governing law and dispute resolution provisions
1. Islamic Structure: Detailed Sharia structure if using specific Islamic financing concepts (e.g., Murabaha, Ijara)
2. Parent Company Support: Additional provisions regarding parent company support or guarantees
3. Regulatory Compliance: Specific provisions for compliance with Saudi regulatory requirements
4. Foreign Currency Provisions: Required when loan is in non-Saudi Riyal currency
5. Inter-creditor Provisions: Required when multiple lenders are involved
6. Tax Provisions: Detailed tax provisions if cross-border elements exist
7. Sharia Board Approval: Reference to and conditions of Sharia board approval if required
1. Form of Drawdown Request: Template for requesting loan disbursements
2. Repayment Schedule: Detailed schedule of repayment dates and amounts
3. Conditions Precedent Documents: List of required documents and conditions
4. Form of Compliance Certificate: Template for periodic compliance certification
5. Security Documents: Forms of security documents and guarantees
6. Profit Rate Calculation: Methodology for calculating Sharia-compliant profit
7. Required Authorizations: List of required regulatory and corporate approvals
8. Group Structure Chart: Diagram showing relationship between parent and subsidiary
9. Sharia Structure: Detailed explanation of Islamic finance structure if applicable
Relevant legal definitions
Clauses
Relevant Industries
Banking & Financial Services
Manufacturing
Real Estate & Construction
Energy & Utilities
Telecommunications
Retail & Consumer Goods
Healthcare
Technology
Industrial
Transportation & Logistics
Relevant Teams
Legal
Finance
Treasury
Compliance
Risk Management
Corporate Secretariat
Islamic Banking
Corporate Finance
Investment
Tax
Relevant Roles
Chief Financial Officer
Finance Director
Legal Counsel
Corporate Lawyer
Treasury Manager
Financial Controller
Compliance Officer
Corporate Secretary
Risk Manager
Investment Manager
Banking Relationship Manager
Sharia Compliance Officer
Corporate Finance Manager
Group Finance Manager
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