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Negative Pledge Agreement

Negative Pledge Agreement Template for Saudi Arabia

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Key Requirements PROMPT example:

Negative Pledge Agreement

"I need a Negative Pledge Agreement under Saudi Arabian law for a syndicated facility agreement closing on March 15, 2025, where the borrower is a manufacturing company with subsidiaries in multiple GCC countries, and we need to include specific carve-outs for existing project finance security."

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Document background
The Negative Pledge Agreement serves as a critical risk mitigation tool in Saudi Arabian financing transactions, providing lenders with protection against the dilution of their credit position through the creation of competing security interests. This document is typically used in conjunction with facility agreements, particularly in unsecured lending scenarios where the lender seeks to maintain the borrower's asset base available for general creditor claims. The agreement must be structured to comply with both Shariah principles and Saudi Arabian commercial regulations, including the Commercial Courts Law and Banking Control Law. It contains specific provisions detailing prohibited actions, permitted exceptions, monitoring requirements, and consequences of breach, all tailored to be enforceable within the Saudi legal system.
Suggested Sections

1. Parties: Identification of the parties including the borrower/promisor and the beneficiary/promisee

2. Background: Context of the agreement, including reference to any facility agreement or main financing transaction

3. Definitions: Key terms used in the agreement, including 'Security Interest', 'Permitted Security', and 'Secured Assets'

4. Negative Pledge Covenant: Core undertaking not to create or permit to subsist any security interest over the specified assets

5. Permitted Security: Exceptions to the negative pledge covenant, listing specifically allowed security interests

6. Representations and Warranties: Statements about the borrower's current position regarding existing security interests and capacity to enter into the agreement

7. Duration: Period for which the negative pledge remains in effect, typically linked to the underlying facility

8. Compliance and Reporting: Obligations to report on compliance and notify of any potential breaches

9. Remedies: Consequences of breach and available remedies, subject to Shariah principles

10. Governing Law and Jurisdiction: Confirmation of Saudi law as governing law and jurisdiction of Saudi courts

Optional Sections

1. Further Assurance: Additional undertakings to perfect or protect the negative pledge, used in complex transactions

2. Shariah Compliance Declaration: Explicit confirmation of Shariah compliance, used when required by regulatory authorities or Islamic financial institutions

3. Multiple Beneficiaries Provisions: Provisions dealing with multiple beneficiaries of the negative pledge, used in syndicated facilities

4. Cross-Border Provisions: Additional provisions for international transactions involving assets in multiple jurisdictions

5. Security Agent Provisions: Provisions regarding the appointment and role of a security agent, used in syndicated facilities

6. Accession Provisions: Mechanism for additional parties to accede to the agreement, used in expandable facilities

Suggested Schedules

1. Schedule 1 - Specified Assets: Detailed list of assets covered by the negative pledge

2. Schedule 2 - Permitted Security: Detailed list and description of permitted security interests

3. Schedule 3 - Form of Compliance Certificate: Template for periodic compliance certification

4. Schedule 4 - Existing Security Interests: List of any pre-existing security interests that are carved out from the negative pledge

5. Appendix A - Form of Accession Deed: Template for new parties joining the agreement, if applicable

6. Appendix B - Form of Notice to Third Parties: Template for notifying relevant third parties of the negative pledge restrictions

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 | Serial Founder & Legal AI Author

alex.den.21@genieai.co
Relevant legal definitions







































Clauses


























Relevant Industries

Banking and Financial Services

Islamic Finance

Real Estate and Construction

Manufacturing and Industrial

Energy and Natural Resources

Healthcare

Telecommunications

Retail and Consumer Goods

Transportation and Logistics

Technology

Relevant Teams

Legal

Finance

Treasury

Compliance

Risk Management

Corporate Banking

Islamic Banking

Credit

Corporate Secretariat

Investment

Relevant Roles

Legal Counsel

Finance Director

Chief Financial Officer

Treasury Manager

Compliance Officer

Risk Manager

Corporate Banking Manager

Islamic Finance Specialist

Credit Risk Officer

Corporate Secretary

Investment Manager

Shariah Compliance Officer

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks, 聽Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination, 聽Severance Pay, Governing Law, Entire Agreemen

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