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Loan Commitment Agreement Template for Hong Kong

A Hong Kong law-governed Loan Commitment Agreement is a formal contract between a lender and borrower that establishes the terms and conditions under which the lender agrees to make available a specified loan facility. The agreement complies with Hong Kong banking regulations and financial services legislation, incorporating specific requirements under the Banking Ordinance and Money Lenders Ordinance. It details the commitment amount, availability period, conditions precedent, drawdown mechanics, interest calculations, repayment terms, and security arrangements (if applicable), while ensuring compliance with Hong Kong's robust financial regulatory framework.

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What is a Loan Commitment Agreement?

The Loan Commitment Agreement is a crucial document in Hong Kong's financial landscape, used when a lender agrees to make available a loan facility to a borrower under specified terms and conditions. This agreement is particularly important in Hong Kong's position as a major financial hub, where it must comply with the jurisdiction's sophisticated banking and financial services regulations. The document typically precedes the actual loan agreement and provides certainty to borrowers regarding the availability of funds while protecting lenders through carefully structured conditions precedent and covenants. It is commonly used in corporate financing, property development, business expansion, and other commercial contexts where formal commitment to provide financing is required before the actual drawdown. The agreement must adhere to Hong Kong regulatory requirements, including those under the Banking Ordinance and Money Lenders Ordinance, particularly regarding interest rate calculations, disclosure requirements, and security arrangements.

What sections should be included in a Loan Commitment Agreement?

1. Parties: Identification of the lender(s) and borrower(s) with their full legal names and addresses

2. Background: Context of the loan commitment, relationship between parties, and purpose of the facility

3. Definitions and Interpretation: Definitions of key terms used in the agreement and rules of interpretation

4. The Facility: Details of the loan commitment including amount, purpose, and availability period

5. Conditions Precedent: Conditions that must be satisfied before the facility becomes available

6. Drawdown Mechanics: Procedures and requirements for requesting and making drawdowns

7. Interest and Fees: Interest rate provisions, calculation methods, and applicable fees

8. Repayment and Prepayment: Terms for repayment, prepayment options, and related conditions

9. Representations and Warranties: Standard representations and warranties given by the borrower

10. Covenants: Positive and negative covenants applicable to the borrower

11. Events of Default: Circumstances constituting default and consequences

12. Changes to Parties: Provisions regarding assignment and transfer rights

13. Payments and Calculations: Payment mechanics, business day conventions, and calculation principles

14. Notices: Communication procedures and contact details

15. General Provisions: Miscellaneous legal provisions including governing law and jurisdiction

What sections are optional to include in a Loan Commitment Agreement?

1. Security: Details of any security arrangements - include if the loan is secured

2. Guarantee: Terms of any guarantee - include if there are guarantors

3. Syndication Provisions: Provisions for multiple lenders - include if the facility is syndicated

4. Increased Costs and Tax Gross-up: Provisions for dealing with regulatory changes and tax implications - include for sophisticated borrowers

5. Market Disruption: Provisions dealing with market disruption events - include for HIBOR-based facilities

6. Set-off Rights: Detailed set-off provisions - include for institutional lenders

7. Compliance Provisions: Specific regulatory compliance requirements - include for regulated borrowers

What schedules should be included in a Loan Commitment Agreement?

1. Form of Drawdown Request: Standard form for requesting drawdowns under the facility

2. Conditions Precedent Documents: List of required documents and conditions to be satisfied

3. Repayment Schedule: Detailed schedule of repayment dates and amounts if term loan

4. Fee Schedule: Detailed breakdown of all applicable fees

5. Form of Transfer Certificate: Standard form for transferring commitments/loans

6. Security Documents: Forms of security documents if applicable

7. Compliance Certificate: Form of periodic compliance certificate to be provided by borrower

Authors

Alex Denne

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

Jurisdiction

Hong Kong

Publisher

黑料视频

Document Type

Service Letter

Cost

Free to use

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