Debt Waiver Letter

Deed of Release of Debt

CO.LAT.11

This Deed of Release of Debt is a letter agreement in the form of a deed that releases a borrower from a debt that it owes. To be valid in law, a complete waiver of a loan must be contained in a deed and properly witnessed.

This template is designed to be used when both the lending and borrowing entities are companies, although it can be adapted to be used where one or other party is an individual. A typical scenario is where a parent company proposes to write off a debt owed to it by a wholly owned subsidiary.

The directors of both companies will need to consider their statutory duties under the Companies Act 2006, in particular s.172 (duty to promote the success of the company) when writing off a loan to ensure it was in the best interests of the company. The board is likely to need to document this in a board meeting. There is unlikely to need to be shareholder approval in relation to the write off, however the articles should be checked to ensure that this is not required. In addition particularly if it is an inter-company loan, there may be conflict issues that need to be approved, for example if the directors of the parent are also directors of the wholly owned subsidiary. Shareholder approval may need to be sought in these circumstances.

This template is a complete debt write off rather than a partial debt write off or a waiver of certain terms under the loan agreement.

Note that in relation to the write off of any loan there are likely to be both accounting and tax issues to consider. This is beyond the scope of this site; it is however strongly recommended that you consider seeking the relevant advice in relation to any accounting and tax issues that may arise.

This Deed of Release of Debt is in open format. Either enter the requisite details in the highlighted fields or adjust the wording to suit your purposes.

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