A letter of subordination of loan and continual financial support is often requested by banks for the creation of a foreign subsidiary.
It’s a guarantee for the bank in case of default of the subsidiary.
The document is usually to be signed by the company’s director and / or its shareholders.
Subordination of loan and continual financial support
<On company letterhead>
<Date of the day>
The Board of Directors
<Company name>
<Address>
Dear Sir,
In view of the excess of liabilities over assets of <Company name>, disclosed by its accounts for the period from <Date of incorporation> to <Period end date>, and in order that the position be rectified to avoid the risk of that Company being said to continue business.
Subordination of loan
We, the related company, hereby confirm that the amount due by this Company to us are hereby subordinated to the prior payment in full of all indebtedness and liabilities of this Company and that it is our intention to continue to subordinate our claims to that of other creditors.
Continual Financial Support
We, the shareholders, hereby confirm that we continue to support the aforesaid company for the coming year and that sufficient fund will be made available to this company to meet its liabilities as they fall due.
Yours faithfully
<Company name>
<Director name and first name>
Signing
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