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Loan Guarantee Agreement

Loan Guarantee Agreement Template for Saudi Arabia

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Key Requirements PROMPT example:

Loan Guarantee Agreement

"I need a Loan Guarantee Agreement under Saudi law for a corporate guarantor securing a 5-year term loan of SAR 10 million to a manufacturing company, with the guarantee to become effective from March 1, 2025."

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Document background
The Loan Guarantee Agreement is a critical document used in Saudi Arabian financial transactions when a third party (Guarantor) agrees to secure the loan obligations of a borrower. This agreement is particularly important in the Saudi Arabian market where personal and corporate guarantees play a significant role in financing arrangements. The document must comply with both Saudi law and Shariah principles, particularly regarding the concept of kafala (guarantee) in Islamic finance. It typically includes detailed provisions about the scope of the guarantee, enforcement mechanisms, and the rights and obligations of all parties. The agreement must conform to SAMA regulations and the Commercial Court Law, while ensuring all provisions are Shariah-compliant. This type of agreement is commonly used in corporate financing, project finance, and general commercial lending transactions within Saudi Arabia.
Suggested Sections

1. Parties: Identification of the Guarantor, Lender (Beneficiary), and the Principal Debtor

2. Background: Context of the guarantee, reference to the principal loan agreement, and purpose of the guarantee

3. Definitions and Interpretation: Definitions of key terms and interpretation rules, including Shariah-compliant terminology

4. Guarantee and Indemnity: Core guarantee obligations, scope of guaranteed liabilities, and indemnification provisions

5. Nature of Guarantee: Specification that the guarantee is unconditional, irrevocable, and continuing

6. Representations and Warranties: Guarantor's confirmations regarding capacity, authority, and Shariah compliance

7. Payment Mechanics: Procedures for payment, currency provisions, and payment priorities

8. Costs and Expenses: Allocation of costs related to preparation, enforcement, and preservation of the guarantee

9. Duration and Release: Term of the guarantee and conditions for release

10. Communications: Notice provisions and contact details

11. Assignment and Transfer: Provisions regarding transfer of rights and obligations

12. Governing Law and Jurisdiction: Saudi law as governing law and jurisdiction of Saudi courts

13. Execution: Signature blocks and execution formalities

Optional Sections

1. Multiple Guarantors: Additional provisions for joint and several liability when there are multiple guarantors

2. Security Provisions: Specific security arrangements supporting the guarantee

3. Counter-Indemnity: Principal debtor's obligation to indemnify the guarantor

4. Islamic Finance Provisions: Detailed Shariah compliance provisions if required by the parties or transaction structure

5. Currency Conversion: Provisions for handling multiple currencies if the guarantee covers cross-border transactions

6. Tax Provisions: Specific tax-related provisions if relevant to the transaction

7. Financial Covenants: Additional financial commitments of the guarantor if required

8. Power of Attorney: Authorization provisions for enforcement purposes

Suggested Schedules

1. Form of Demand: Template for making a demand under the guarantee

2. Principal Loan Agreement: Copy or key terms of the underlying loan agreement

3. Guarantor Board Resolution: Corporate authorization for providing the guarantee

4. Conditions Precedent: List of documents and conditions required before guarantee becomes effective

5. Security Details: Details of any security provided in support of the guarantee

6. Contact Details: Comprehensive contact information for all parties

7. Shariah Approval: Relevant Shariah board approvals or certifications if required

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

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Applicable Law
Business Day
Default
Event of Default
Facility Agreement
Financing Documents
Guarantee
Guaranteed Obligations
Guaranteed Amount
Guarantor
Kafala
Kafalah Agreement
Lender
Material Adverse Effect
Notice of Demand
Obligor
Outstanding Amount
Payment Date
Principal Debtor
Principal Loan Agreement
Release Date
Relevant Jurisdiction
SAMA
Saudi Law
Security
Security Documents
Shariah
Shariah Board
Shariah Principles
Specified Currency
Tax
Transaction Documents
Valid Demand
Relevant Industries

Banking

Financial Services

Islamic Finance

Corporate Finance

Real Estate

Construction

Manufacturing

Trading

Industrial

Infrastructure

Energy

Healthcare

Relevant Teams

Legal

Finance

Treasury

Compliance

Risk Management

Corporate Secretariat

Credit

Islamic Banking

Commercial

Relevant Roles

Legal Counsel

Finance Director

Chief Financial Officer

Compliance Officer

Shariah Compliance Manager

Corporate Secretary

Risk Manager

Treasury Manager

Banking Relationship Manager

Credit Risk Officer

General Counsel

Transaction Manager

Islamic Finance Specialist

Commercial Director

Industries
Islamic Shariah Law: The fundamental source of law in Saudi Arabia that governs all contracts and commercial transactions, including principles related to riba (interest), gharar (uncertainty), and the general principles of guarantees (kafala)
Commercial Court Law (2020): Governs commercial transactions and disputes in Saudi Arabia, including provisions related to commercial contracts and guarantees
SAMA Banking Control Law: Regulates banking activities and financial institutions in Saudi Arabia, including requirements for loan guarantees and security arrangements
Commercial Pledge Law (2018): Governs secured financing transactions and provides framework for creating and enforcing security interests
Law of Enforcement (2012): Regulates the enforcement of judgments, securities and commercial papers, including the enforcement of guarantee obligations
SAMA Rules on Bank Guarantees: Specific regulations governing the issuance and management of bank guarantees, including format requirements and procedural rules
Anti-Money Laundering Law: Contains provisions relevant to financial transactions and due diligence requirements in guarantee arrangements
Commercial Courts Law: Provides the procedural framework for resolving commercial disputes, including those related to guarantee agreements
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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