Conditions precedent

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Conditions precedent
  • Nature of conditions precedent
  • Documentary conditions precedent
  • Factual conditions precedent
  • Determining whether the conditions precedent are satisfied
  • Timing for satisfaction of conditions precedent
  • Form and substance of documentary conditions precedent
  • Consequences of the conditions precedent not being satisfied
  • The lender is not obliged to fund
  • The lender can decide to waive the outstanding conditions precedent
  • More...

Conditions precedent

In financing transactions, conditions precedent are the conditions that need to be fulfilled for funding to occur.

This Practice Note explains:

  1. the nature of conditions precedent

  2. the different types of conditions precedent (ie documentary or factual)

  3. what needs to be taken into account when determining whether the conditions precedent have been satisfied, and

  4. what happens if the conditions precedent are not satisfied

This Practice Note looks at the usual conditions precedent in a finance transaction at the time of:

  1. first drawdown, and

  2. future drawdowns throughout the life of the facility

Where appropriate, this Practice Note highlights relevant provisions in Precedent: Facility agreement (term loan): single company borrower—bilateral—with or without security or a guarantee and the Loan Market Association (LMA) investment grade multicurrency term facility agreement (the LMA facility agreement) (available to LMA members on the LMA website).

The LMA has a series of helpful user guides in the Documents & Guidelines section of its website which provide guidance on its documentation. Additionally, the Association of Corporate Treasurers (ACT) ACT Borrower’s Guide to the LMA’s Investment Grade Agreements contains useful guidance on the conditions precedent provisions in LMA investment grade documentation.

For information on preparing or reviewing conditions precedent, see Practice Note: Preparing or reviewing the conditions precedent in loan transactions.

Nature of conditions precedent

The provisions of a typical facility agreement envisage that it will be signed some time before

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