Loan Sharing Agreement Template for New Zealand

A Loan Sharing Agreement is a critical legal document that enables multiple lenders to collaborate in providing financing to a borrower under New Zealand law. This arrangement becomes necessary when the loan amount exceeds what a single financial institution can or wishes to provide, distributing both the financial commitment and associated risks among participating lenders.

When do you need this document?

You'll need a Loan Sharing Agreement when multiple banks or financial institutions are participating in a single loan facility. This commonly occurs in commercial real estate developments where loan amounts reach millions of dollars, infrastructure projects requiring substantial capital investment, or corporate financing arrangements that exceed individual lender limits. The agreement is also essential when lenders want to diversify their portfolio risk by sharing exposure across multiple institutions, or when regulatory capital requirements prevent a single lender from taking the full commitment.

Key legal considerations

Your agreement must clearly define each lender's commitment share and proportional interest in the loan facility. Establish comprehensive voting mechanisms for major decisions such as enforcement actions, covenant waivers, or loan modifications, as these decisions typically require majority or unanimous consent. Include detailed provisions for information sharing between lenders while maintaining borrower confidentiality requirements. Address the appointment and powers of a facility agent who will act on behalf of all lenders for administrative purposes. Consider security arrangements and how any guarantees or collateral will be held and enforced, often through a security trustee structure. Establish clear procedures for assignment or transfer of lender participations, including consent requirements and minimum transfer amounts.

Legal requirements in New Zealand

Your Loan Sharing Agreement must comply with the Credit Contracts and Consumer Finance Act 2003, which mandates specific disclosure requirements and consumer protections if the borrower is an individual or meets the definition of a consumer under the Act. Ensure compliance with the Fair Trading Act 1986 to avoid misleading or deceptive conduct in loan marketing and documentation. The Contract and Commercial Law Act 2017 governs the fundamental legal framework for contract formation and interpretation. If your loan involves property security, comply with the Property Law Act 2007 requirements for creating and registering security interests. Consider Anti-Money Laundering and Countering Financing of Terrorism Act 2009 obligations, particularly regarding customer due diligence and suspicious transaction reporting. Ensure your agreement includes appropriate New Zealand governing law and jurisdiction clauses, and consider whether any foreign lenders require regulatory approvals for their participation in New Zealand loan facilities.