Non-Binding Comfort Letter
This Non-Binding Comfort Letter is a form of “comfort” offered by a parent company to a lender in respect of a loan that has been made to the parent’s subsidiary.
Comfort letters are generally used as alternatives to guarantees. They are usually provided by a parent company to a lender where the parent company is unable (or unwilling) to provide a guarantee to the lender in respect of a loan the lender has made to one of the parent’s subsidiaries. This may be because the parent is restricted from doing so for constitutional reasons or because its own borrowings prevent it from giving guarantees.
The parent may
• The borrower is its subsidiary;
• The parent will maintain its shareholding in the borrower whilst the loan is still outstanding; and
• The borrower can comply with its obligations under the loan.
Comfort letters can be binding or non-binding. This comfort letter is intended to be non-binding and clearly states as such. Neither a consideration nor a governing law clause has therefore been included. Such a letter may still carry moral and reputational force against the parent should the borrower default. It may be advisable to seek independent legal advice if you are intending to use a non-binding comfort letter.
This sub-folder also contains a Binding Comfort
Alternatively, for a parent company wishing to give a guarantee, the guarantee agreements in our Guarantees
This Non-Binding Comfort Letter is in open format.
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