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Common Terms Agreement Template for South Africa

A Common Terms Agreement under South African law serves as the primary document in syndicated lending and other complex financing arrangements, establishing the standard terms and conditions that apply across multiple facility agreements. This document incorporates specific provisions required by South African legislation, including compliance with the Companies Act, National Credit Act, and Financial Intelligence Centre Act requirements. It sets out the common representations, warranties, covenants, and events of default that apply to all related financing documents, while ensuring alignment with South African banking regulations and exchange control requirements.

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What is a Common Terms Agreement?

The Common Terms Agreement is a fundamental document used in complex financing transactions in South Africa, particularly in syndicated lending arrangements where multiple lenders provide financing to one or more borrowers. It streamlines the documentation process by consolidating common provisions that would otherwise need to be repeated across multiple facility agreements. This document type is essential when structuring large-scale financings, project finance transactions, or corporate lending facilities with multiple tranches. The agreement must comply with South African banking regulations, exchange control requirements, and other relevant legislation while incorporating international best practices in structured finance. It typically works in conjunction with facility agreements, security documents, and intercreditor arrangements to create a comprehensive financing structure.

What sections should be included in a Common Terms Agreement?

1. Parties: Identification of all parties to the agreement, including borrowers, lenders, agents, and security providers

2. Background: Context of the transaction, relationship between the parties, and purpose of the agreement

3. Definitions and Interpretation: Comprehensive definitions of terms used throughout the agreement and interpretation rules

4. The Facilities: Overview of all facilities covered by the common terms

5. Conditions Precedent: Conditions that must be satisfied before the agreement becomes effective

6. Representations and Warranties: Standard and transaction-specific representations and warranties given by the borrowers

7. Covenants: Financial and non-financial undertakings, including information covenants

8. Events of Default: Circumstances constituting default and their consequences

9. Changes to Parties: Provisions regarding transfers, assignments, and substitution of parties

10. Administration: Role and duties of facility agent, calculation methods, payment mechanics

11. Costs and Expenses: Allocation of transaction costs and ongoing expenses

12. Indemnities: Scope and nature of indemnities provided by borrowers

13. Set-off: Rights of set-off and their exercise

14. Notices: Communication procedures and contact details

15. Calculations and Certificates: Rules for calculations and evidence of amounts due

16. Partial Invalidity: Severability provisions

17. Remedies and Waivers: Rights and remedies of the parties

18. Amendments and Waivers: Procedures for modifying the agreement

19. Governing Law: South African law as governing law and jurisdiction provisions

20. Enforcement: Dispute resolution procedures and enforcement mechanisms

What sections are optional to include in a Common Terms Agreement?

1. Tax Gross Up and Indemnities: Detailed tax provisions, required if cross-border elements or complex tax structures are involved

2. Increased Costs: Provisions dealing with regulatory changes affecting lenders' costs, needed for longer-term facilities

3. Market Disruption: Provisions addressing market disruption events, important for floating rate facilities

4. Anti-corruption Laws: Specific provisions regarding compliance with anti-corruption laws, needed for international transactions

5. Sanctions: Compliance with international sanctions, required for international parties

6. Break Costs: Provisions for early repayment costs, needed for term facilities

7. Parallel Debt: Required if security is to be held in jurisdictions that don't recognize trust concepts

8. Exchange Control: Specific South African exchange control provisions, required for cross-border transactions

What schedules should be included in a Common Terms Agreement?

1. Schedule 1 - Initial Conditions Precedent: List of documents and conditions required before first utilization

2. Schedule 2 - Requests and Notices: Forms of utilization requests and other standard notices

3. Schedule 3 - Form of Transfer Certificate: Standard form for transfers between lenders

4. Schedule 4 - Form of Accession Deed: Form for new parties joining the agreement

5. Schedule 5 - Form of Compliance Certificate: Template for periodic compliance certification

6. Schedule 6 - Existing Security: Details of security already in place

7. Schedule 7 - Form of Confidentiality Undertaking: Standard confidentiality agreement for potential new lenders

8. Schedule 8 - Timetables: Timing requirements for notices and payments

9. Schedule 9 - Forms of Financial Statements: Required format for financial reporting

10. Appendix A - Transaction Security Documents: List and copies of all security documents

11. Appendix B - Required Insurance: Details of insurance requirements and policies

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

South Africa

Publisher

Ƶ

Document Type

Agreement Contract

Cost

Free to use

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