The Loan Against Shares Agreement is a specialized financial instrument used in South Africa when a shareholder needs to raise funds using their shareholding as collateral. This document is particularly relevant in scenarios where individuals or companies want to access liquidity without selling their shareholding, commonly used in investment structuring, business expansion, or personal financing. The agreement must comply with South African financial regulations, including the National Credit Act, Financial Markets Act, and Companies Act. It typically includes detailed provisions for share valuation, margin calls, enforcement mechanisms, and regulatory compliance requirements. The document is structured to protect both lender and borrower interests while ensuring the security arrangement is properly documented and legally enforceable under South African law.
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1. Parties: Identification of the Lender and Borrower with their full legal details
2. Background: Context of the agreement, including the Borrower's ownership of shares and desire to obtain a loan
3. Definitions and Interpretation: Definitions of key terms and interpretation rules for the agreement
4. Loan Amount and Purpose: Specification of the loan amount and its intended purpose
5. Interest and Fees: Details of interest rate, calculation method, and any applicable fees
6. Security Arrangements: Details of the share pledge, including number and type of shares, and security registration requirements
7. Representations and Warranties: Statements of fact and assurances from both parties
8. Covenants: Ongoing obligations of the Borrower regarding the shares and loan
9. Events of Default: Circumstances constituting default and consequences
10. Enforcement Rights: Lender's rights and remedies upon default, including share disposal
11. Payment Terms: Repayment schedule, prepayment provisions, and payment mechanics
12. Duration and Termination: Term of the loan and circumstances for early termination
13. General Provisions: Standard clauses including notices, amendments, governing law, and jurisdiction
1. Guarantee: Required when a third-party guarantor is providing additional security for the loan
2. Share Retention Requirements: Include when the Borrower must maintain a minimum shareholding
3. Dividend Rights: Specify if there are special arrangements regarding dividends on pledged shares
4. Multiple Lenders: Required when there is more than one lender, including syndication provisions
5. Share Top-Up Requirements: Include when additional shares must be pledged if share value decreases
6. Foreign Exchange Provisions: Required when the loan and shares are denominated in different currencies
7. Tax Provisions: Detailed tax clauses needed when complex tax implications exist
1. Schedule 1 - Share Details: Detailed description of pledged shares including share certificates, class, and quantity
2. Schedule 2 - Repayment Schedule: Detailed breakdown of repayment dates and amounts
3. Schedule 3 - Security Documents: List of all security documents required including share certificates and transfer forms
4. Schedule 4 - Conditions Precedent: List of documents and conditions required before loan disbursement
5. Schedule 5 - Form of Transfer: Template for share transfer forms in case of enforcement
6. Appendix A - Compliance Certificates: Templates for ongoing compliance certification
7. Appendix B - Notice Forms: Standard forms for various notices under the agreement
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