What Is Borrower Accession Agreement

It is customary for loan and securities documents to include the protection of lenders and creditors when an existing borrower or credit group acquires other subsidiaries or introduces other companies of the group into its financing agreements. In general, these safeguards may require the parent company to have each new subsidiary, as a borrower and/or guarantor, become a contracting party to the facility agreement and to guarantee some or all of the assets in favour of the lender (s) with respect to the obligations of the borrower and the surety companies in accordance with the facility document. This issue is often dealt with as part of an act of adherence to (i) the facility agreement and (ii) relevant security documents. In each act of membership, the subsidiary will confirm that it intends to be bound, as a new borrower and/or guarantor, to the terms of the facility agreement and that it intends to be bound to the terms of the existing guarantee agreement (s) and to grant guarantees on its assets on the same terms as this original guarantee agreement. Each act of membership refers to the initial security agreement or ease to determine the agreements to which it is a member. From the lender`s perspective, it is clearly essential that the membership documents operate in such a way that new businesses are linked to the original documentation. But what if the description of the original documentation is wrong? Does such an error invalidate membership and invalidate an alleged security interest in the assets of the member subsidiary, or can errors in the documents be interpreted differently to make them effective? Here are some of the questions the English High Court recently asked in Pathway Finance S`rl against London Hanger Lane Centre Ltd [2020] EWHC 1191 (Ch) („Pathway“). If errors are highlighted, lenders can also verify whether additional security documents should be granted to guarantee the lender`s rights, but this takes time and cost to clarify and if the error is the fault of the lender or its lawyers, it is unlikely that the borrower will agree to compensate the lender for the costs incurred.

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