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Conditions in legal documentation

Conditions in legal documentation


  • Conditions precedent – the set of various conditions that Borrower must fulfill in order to be able to utilize the lending products under loan contract. This typically includes extract from commercial register, corporate approvals, Signatures specimen, KYC underlying documents and naturally execution of security documents (mortgage of Property, pledge of receivables)
  • Conditions subsequent – these are the conditions that Borrower is obliged to deliver within certain period after drawing the credit facility; this means that Bank feels comfort in receiving some minor collateral not necessarily prior the utilization of loans (for instance pledge of insurance policy or Notary deed for stocks pledge) as this form of security is also time-consuming and certain administrative steps need to be done.

The main difference between covenants and conditions is that covenants are binding for Borrower during the entire loan life-time, while conditions are rather a one-off duty to be met by Client typically prior to or short after the drawing the facility.

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