Non Recourse Promissory Note Template for Ireland

A Non Recourse Promissory Note is a financial instrument that fundamentally changes the risk profile of lending transactions by limiting the lender's ability to pursue repayment beyond specific pledged assets. Unlike traditional promissory notes, this document provides you with crucial protection by ensuring that if you default, the lender cannot pursue your other assets, personal wealth, or business holdings beyond the designated collateral.

When do you need this document?

You'll need a Non Recourse Promissory Note in asset-based lending scenarios where you want to limit your exposure to specific collateral. This is particularly common in project finance arrangements, where a special purpose vehicle borrows against future cash flows or specific assets. Real estate developers frequently use these instruments when financing development projects, ensuring that personal assets remain protected if the project fails. Investment funds and private equity firms also utilize non-recourse notes when acquiring assets, allowing them to isolate risk to particular investments. Additionally, you might need this document in acquisition financing where the target company's assets serve as the primary security, or in equipment financing where expensive machinery or technology serves as collateral.

Key legal considerations

The non-recourse clause is the most critical provision, as it defines exactly which assets the lender can pursue in case of default. You must ensure this clause is clearly drafted to avoid ambiguity that could expose additional assets. Interest rate provisions require careful attention, particularly regarding calculation methods, payment frequency, and any penalty rates for late payment. Default provisions should specify what constitutes an event of default and the lender's remedies, which should be limited to the pledged collateral. Security provisions must clearly identify and describe the collateral, including any registration requirements under Irish law. Personal guarantees can undermine the non-recourse nature, so any guarantee clauses must be carefully reviewed to ensure they don't inadvertently create additional personal liability. The maturity date and payment terms should align with the expected cash flow from the underlying asset or project.

Legal requirements in Ireland

Under Irish law, your Non Recourse Promissory Note must comply with the Bills of Exchange Act 1882, which sets out formal requirements for promissory notes including written form, unconditional promise to pay, and proper execution. If you're a consumer borrower, the Consumer Credit Act 1995 may apply, requiring specific disclosure and cooling-off provisions. The Central Bank Act 1997 governs certain financial activities, so you should ensure compliance if the transaction involves regulated entities. For real property security, the Land and Conveyancing Law Reform Act 2009 sets out registration requirements that may affect your security arrangements. The Statute of Limitations 1957 establishes time limits for enforcement, typically six years for simple contracts and twelve years for specialty debts under seal. You must also consider stamp duty implications under the Stamp Duties Consolidation Act 1999, as promissory notes may attract stamp duty depending on the amount and structure.