Debenture Agreement

A debenture is a document that acknowledges and contains the terms of a loan. It is typically secured by charges over all or substantially all of the borrower’s property or assets.

Debentures usually bear interest. This interest is payable to the lender before any dividend is paid to the borrower’s shareholders (if any). One of the main advantages of using a debenture agreement is that the interest rate is typically lower than, for example, an overdraft or a typical term loan, owing to the high degree of security for the lender.

What does Debenture Agreement do?

It documents a secured borrowing relationship between a lender and a borrower, including the borrower’s repayment obligations and the security arrangements supporting those obligations.

What does Debenture Agreement cover?

This Debenture can be used for a secured loan or other principal sum, repayable at a fixed date (set by you) and bearing interest until that date.

The principal amount can be inserted in the definition of “Secured Liabilities” or the terms of a loan can be referred to in Schedule 2.

It comprehensively covers the key legal and commercial aspects of the lender and borrower relationship, including (among other things):

• Repayment covenant and (where applicable) interest provisions
• Security and related protections (including a qualifying floating charge and a negative pledge)
• Undertakings, representations and warranties
• Enforcement provisions, including appointment of a receiver
• Administrative provisions such as notices and governing law and jurisdiction

This Debenture can be modified, if desired, to remove the obligation on the borrower to pay interest, instead obliging the borrower to grant to the lender other, non-financial, benefits.

Other statutory note

The execution provisions of this template are compliant and consistent with the requirements of the Land Registry for prescribed form deeds introduced from 20 September 2019.

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