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 made to the parent’s subsidiary.
Comfort letters are generally used as alternatives to guarantees. They are commonly provided where the parent company is unable (or unwilling) to give a guarantee in respect of a loan made to one of its subsidiaries, for example because of constitutional restrictions or because the parent’s own borrowings prevent it from giving guarantees.
What does Non-Binding Comfort Letter do?
It provides written assurances from the parent company to the lender, including assurances that:
- The borrower is the parent’s subsidiary
- The parent will maintain its shareholding in the borrower while the loan remains outstanding
- The borrower can comply with its obligations under the loan
When should you use Non-Binding Comfort Letter?
Use this template where a parent company is not providing a formal guarantee but is prepared to provide comfort to support a lender’s loan to its subsidiary, on a non-binding basis.
This comfort letter is intended to be non-binding and states this clearly. Neither a consideration clause nor a governing law clause is included. A non-binding letter may still carry moral and reputational force against the parent if the borrower defaults. Independent legal advice should be considered if you intend to use a non-binding comfort letter.
Choose the right version
If you want a binding comfort letter instead, use:
If the parent company is willing and able to give a guarantee, use the guarantee templates in this collection, for example:
Non-Binding Comfort Letter is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.