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Letter of Comfort (Keepwell) to Bank / Financial Institution

Parent for Subsidiary

Get peace of mind with Letters of Comfort from your parent company. Non-legally binding, they offer lenders assurance of your company's intentions.

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Document Description

This document is a template letter of comfort for a bank, confirming the intention of the parent company of a group to support its subsidiary. A letter of comfort is non-legally binding and provides the lender with comfort as to the parent company's intention to support its subsidiary. It should not be used to create a legal obligation, in which case a guarantee should be used instead.

The letter confirms that the parent company is aware of all facilities provided or to be provided to the subsidiary by the lender, and will not permit the subsidiary to enter into liquidation or any arrangement with its creditors without first discharging its liability to the lender. The parent company will take all necessary steps to ensure that the subsidiary pays off any debts under the facilities and will not dispose of any shares in the subsidiary that would result in a minority or non-controlling shareholding without the lender's written consent.

It is important to note that a copy of the board resolutions approving the letter of comfort must clearly identify the specific facilities or obligations, without any ambiguity. This is to prevent the company from claiming that it related to other facilities.

How to use this Document?  

Steps to Use This Document:

1. Customise the document: Fill in the blanks with your specific information, including the name and address of the lender, the name of your subsidiary company, and your company's contact details.

2. Understand the purpose of the document: This document is a letter of comfort, which is a non-legally binding assurance provided by a parent company to a lender to show that it is aware of the facilities provided to its subsidiary and intends to ensure that the subsidiary meets its financial obligations.

3. Use the document appropriately: This letter should be used when a party needs to provide a non-binding assurance to a financial institution that it can meet its contractual or financial obligations. If you intend to create a legal obligation, use a guarantee instead.

4. Ensure clarity and specificity: The board resolutions approving the letter of comfort should clearly identify the specific facilities or obligations to avoid any ambiguity that could lead to future disputes.

5. Get both parties to sign: Both parties should sign and return a copy of the document to each other. To avoid any future disputes, both parties may wish to have their signatures witnessed.

6. Record any future amendments: If either party wishes to amend the agreement in the future, both parties should agree to do so, and the original agreement and amendments should be recorded in writing and signed by both parties.

By following these steps, you can use this letter of comfort template effectively to provide assurance to your lender that you will fulfil your financial obligations.



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