Facilities Agreement Template for New Zealand
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What is a Facilities Agreement?
The Facilities Agreement serves as the primary document governing the provision of financial facilities in New Zealand, typically used for corporate lending, project finance, or general corporate purposes. It establishes a legally binding relationship between the lender(s) and borrower(s), detailing all aspects of the facility including amount, purpose, conditions, representations, covenants, and security arrangements. The agreement must comply with New Zealand banking and financial services regulations, including the Contract and Commercial Law Act 2017, Financial Markets Conduct Act 2013, and other relevant legislation. It's essential for documenting significant financial transactions and provides certainty and protection for all parties involved in the lending arrangement.
About the Facilities Agreement
A Facilities Agreement is a comprehensive legal document that governs lending arrangements between financial institutions and borrowers in New Zealand. This agreement sets out the terms and conditions under which credit facilities are made available, including loan amounts, interest rates, repayment schedules, security arrangements, and the rights and obligations of all parties involved.
When do you need this document?
You need a Facilities Agreement when establishing formal lending arrangements for business purposes. This includes corporate acquisitions, working capital facilities, project financing, property development loans, or refinancing existing debt. The agreement is essential when multiple facilities are being provided under a single arrangement, such as a revolving credit facility combined with a term loan. It's also required when sophisticated security arrangements are needed, involving guarantees from related companies or security over various types of assets. Financial institutions typically require this comprehensive documentation for facilities exceeding certain thresholds or when lending to corporate entities rather than individuals.
Key legal considerations
The agreement must clearly define all parties' roles and responsibilities, particularly where multiple lenders are involved through syndicated arrangements. Essential clauses include conditions precedent that must be satisfied before funds can be drawn down, such as legal opinions, insurance policies, and compliance certificates. Representations and warranties provide ongoing assurances about the borrower's financial position and legal capacity. Covenants establish ongoing obligations, including financial ratio maintenance, information reporting, and restrictions on additional borrowing. Default provisions specify events that trigger acceleration of repayment obligations, while security clauses detail the collateral securing the facilities. Cross-default provisions linking the agreement to other borrowing arrangements require careful consideration to avoid unintended consequences.
Legal requirements in New Zealand
New Zealand Facilities Agreements must comply with the Contract and Commercial Law Act 2017, which governs contract formation, interpretation, and remedies. The Personal Property Securities Act 1999 applies when personal property is used as security, requiring proper registration on the Personal Property Securities Register. For consumer lending elements, the Credit Contracts and Consumer Finance Act 2003 may impose additional disclosure and conduct requirements. Anti-Money Laundering and Countering Financing of Terrorism Act 2009 obligations must be addressed through customer due diligence procedures. Interest rate provisions must comply with the Credit Contracts and Consumer Finance Act's restrictions on unreasonable fees. The agreement should specify New Zealand governing law and jurisdiction clauses to ensure enforceability in local courts. Security arrangements over real property must comply with the Property Law Act 2007 and be properly registered against relevant land titles.
GOVERNING LAW
Applicable law
This Facilities Agreement is drafted to comply with New Zealand law. Key legislation includes:
Property Law Act 2007: Governs real property transactions and security interests in property, relevant for any property-related securities under the facility
Personal Property Securities Act 1999: Regulates security interests in personal property, crucial for securing any facilities against personal property collateral
Credit Contracts and Consumer Finance Act 2003: Regulates credit contracts and may apply if the facility agreement involves consumer lending
Anti-Money Laundering and Countering Financing of Terrorism Act 2009: Imposes obligations on financial institutions regarding customer due diligence and transaction monitoring
Financial Markets Conduct Act 2013: Regulates financial products and services, may be relevant if the facility involves financial products or wholesale lending
Companies Act 1993: Relevant for corporate borrowers, governing company powers, directors' duties, and corporate administration
Reserve Bank of New Zealand Act 1989: Contains provisions relevant to banking and financial institutions that may be providing facilities
Fair Trading Act 1986: Prohibits misleading and deceptive conduct in trade, relevant for representations made in facility agreements
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