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Debt Novation Agreement Template for India

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Key Requirements PROMPT example:

Debt Novation Agreement

"I need a Debt Novation Agreement for transferring a corporate loan of INR 50 million from our parent company to our newly formed subsidiary, with the transfer to be effective from March 1, 2025; the original loan was from HDFC Bank and they have already consented to the transfer."

Document background
The Debt Novation Agreement is a crucial document used when there is a need to transfer debt obligations from one party to another under Indian law. It is commonly utilized in corporate restructuring, merger and acquisition scenarios, or when a third party agrees to take over existing debt obligations. The agreement must comply with the Indian Contract Act 1872 and, where applicable, the Banking Regulation Act 1949. It contains essential provisions regarding the transfer of debt, release of the original debtor, assumption of obligations by the new debtor, and preservation or replacement of any security arrangements. This document is particularly important as it creates a new contractual relationship while terminating the original debt obligation, requiring careful attention to existing terms, security arrangements, and regulatory requirements. The agreement becomes especially relevant in situations involving corporate debt restructuring, group company reorganizations, or when businesses are looking to realign their debt obligations.
Suggested Sections

1. Parties: Identifies all parties involved: the Original Debtor, the New Debtor, and the Creditor

2. Background: Recitals explaining the existing debt arrangement and the intention to novate

3. Definitions: Defines key terms used throughout the agreement

4. Novation: Core clause establishing the novation of the debt from the Original Debtor to the New Debtor

5. Release of Original Debtor: Provisions confirming the release of the Original Debtor from obligations

6. Assumption of Obligations: Details of the New Debtor's assumption of the debt obligations

7. Representations and Warranties: Standard representations from all parties regarding their capacity and authority

8. Effective Date: Specifies when the novation takes effect

9. Governing Law and Jurisdiction: Specifies Indian law as governing law and determines jurisdiction for disputes

10. Notices: Details how formal notices should be given between parties

11. Counterparts: Allows execution in multiple counterparts

Optional Sections

1. Security Arrangements: Required when existing security needs to be released or new security is being provided

2. Regulatory Compliance: Include when the transaction involves regulated entities or requires regulatory approvals

3. Tax Provisions: Include specific tax-related provisions when there are significant tax implications

4. Conditions Precedent: Include when novation is subject to fulfillment of certain conditions

5. Consent of Third Parties: Required when third party consents are necessary for the novation

6. Assignment: Include if parties wish to restrict or permit future assignment of rights

7. Costs and Expenses: Include when there's a need to specify who bears the transaction costs

Suggested Schedules

1. Schedule 1 - Existing Debt Details: Details of the original debt agreement, including amount, interest rate, and payment terms

2. Schedule 2 - Payment Schedule: New or continuing payment schedule post-novation

3. Schedule 3 - Security Details: Details of any security or collateral associated with the debt

4. Schedule 4 - Existing Agreement: Copy or details of the agreement being novated

5. Schedule 5 - Conditions Precedent: List of conditions that must be satisfied before novation becomes effective

6. Appendix A - Form of Notices: Standard forms for any notices required under the agreement

7. Appendix B - Completion Requirements: Checklist of documents and actions required to complete the novation

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈ˰æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions
Clauses

































Relevant Industries

Financial Services

Banking

Corporate Services

Real Estate

Manufacturing

Infrastructure

Construction

Retail

Healthcare

Technology

Telecommunications

Relevant Teams

Legal

Finance

Treasury

Corporate Finance

Risk Management

Compliance

Company Secretarial

Senior Management

Banking Relations

Credit

Relevant Roles

Chief Financial Officer

Finance Director

Legal Counsel

Corporate Lawyer

Finance Manager

Treasury Manager

Debt Restructuring Specialist

Company Secretary

Risk Manager

Compliance Officer

Managing Director

Chief Executive Officer

Financial Controller

Banking Relationship Manager

Corporate Finance Manager

Industries







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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