Subordinated Promissory Note for Germany

Subordinated Promissory Note Template for Germany

A Subordinated Promissory Note under German law (Nachrangige Schuldverschreibung) is a debt instrument that documents a subordinated loan agreement where the lender's claims are ranked below other creditors in the event of the borrower's insolvency. The document, governed by German law, particularly the German Civil Code (BGB) and relevant banking regulations, establishes the terms of the subordinated debt, including principal amount, interest rates, repayment terms, and specific subordination provisions. It includes detailed clauses on the ranking of the debt, events of default, and regulatory compliance requirements, especially important when used in the context of regulatory capital requirements.

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What is a Subordinated Promissory Note?

The Subordinated Promissory Note is a crucial financing instrument in German corporate and banking practice, used when entities seek to raise capital while offering investors a higher yield in exchange for accepting a subordinated position in the creditor hierarchy. This document type is particularly relevant for financial institutions meeting regulatory capital requirements, companies seeking to strengthen their capital structure, or in complex financing arrangements where debt subordination is required. The document must comply with German law requirements, particularly the German Civil Code (BGB), Banking Act (KWG), and Insolvency Code (InsO). It typically includes detailed provisions on interest payments, repayment terms, subordination mechanics, and regulatory compliance matters. The subordinated nature of the instrument means that in case of insolvency, the noteholder's claims are satisfied only after senior creditors' claims have been met.

What sections should be included in a Subordinated Promissory Note?

1. Parties: Identification of the issuer and the noteholder

2. Background: Context of the issuance and purpose of the subordinated promissory note

3. Definitions: Key terms used throughout the document

4. Principal Amount and Issuance: Specification of the loan amount and issuance details

5. Interest: Interest rate, calculation method, and payment dates

6. Subordination: Terms of subordination and ranking in relation to other creditors

7. Repayment: Terms and conditions for repayment of the principal amount

8. Events of Default: Circumstances constituting default and consequences

9. Representations and Warranties: Basic representations by the issuer regarding capacity and authority

10. Notices: Communication requirements and contact details

11. Governing Law and Jurisdiction: Confirmation of German law governance and jurisdiction

What sections are optional to include in a Subordinated Promissory Note?

1. Tax Gross-Up: Provisions for tax treatment and potential gross-up payments, included when tax implications need to be specifically addressed

2. Transferability: Terms regarding the transfer or assignment of the note, included when the note is intended to be transferable

3. Security: Details of any security or collateral, included when the note is secured despite its subordinated nature

4. Regulatory Compliance: Specific provisions required for regulatory capital treatment, included when the note is issued by or to regulated entities

5. Currency Provisions: Terms for handling different currencies, included for cross-border transactions

6. Set-Off: Provisions regarding set-off rights, included when set-off needs to be specifically addressed or excluded

What schedules should be included in a Subordinated Promissory Note?

1. Interest Calculation: Detailed methodology for interest calculations and examples

2. Repayment Schedule: Detailed schedule of repayment dates and amounts if applicable

3. Form of Transfer Certificate: Standard form for documenting transfers of the note if transferable

4. Regulatory Requirements: Specific regulatory requirements and confirmations if applicable

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Germany

Publisher

Genie AI

Document Type

Promissory Note

Sector

Banking

Cost

Free to use
Relevant legal definitions
Relevant Industries

Financial Services

Banking

Insurance

Investment Management

Corporate Finance

Real Estate

Infrastructure

Private Equity

Manufacturing

Energy

Relevant Teams

Legal

Finance

Treasury

Compliance

Risk Management

Corporate Finance

Regulatory Affairs

Credit Risk

Capital Markets

Investment Management

Relevant Roles

Chief Financial Officer

Treasury Manager

Finance Director

Legal Counsel

Compliance Officer

Risk Manager

Investment Manager

Corporate Finance Manager

Financial Controller

Regulatory Affairs Manager

Capital Markets Director

Credit Risk 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,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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