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The document titled 'Letter of Comfort (Keepwell) to Bank / Financial Institution' is a formal letter that serves as a guarantee from a parent company to a bank or financial institution regarding the financial obligations of its subsidiary company. The letter is addressed to the lender and includes important information such as the account details, job company information, and contact details.
The purpose of this letter is to assure the lender that the parent company is aware of the facilities provided to the subsidiary and will take necessary actions to ensure the repayment of any indebtedness arising from these facilities. The parent company also commits to not allowing the subsidiary to enter into liquidation or any arrangement with its creditors without fully discharging its liability to the lender.
Furthermore, the parent company guarantees that it will not dispose of any shares in the subsidiary that would result in its shareholding being reduced to a minority and non-controlling shareholder without obtaining written consent from the lender or ensuring that the subsidiary's liability to the lender is fully settled.
This letter of comfort applies to both the existing facilities and any new or additional facilities that may be provided by the lender to the subsidiary in the future.
In summary, this document is crucial for establishing a sense of financial security for the lender by obtaining a commitment from the parent company to support the subsidiary's financial obligations.
To effectively use the 'Letter of Comfort (Keepwell) to Bank / Financial Institution', follow these steps:
1. Fill in the account job company information: Enter the relevant details of the account job company, including the company name, address, email, and phone number. This will ensure accurate identification and contact information.
2. Address the letter to the lender: Specify the name of the lender and provide their address in a multi-line format. This will ensure that the letter reaches the intended recipient.
3. Include the current date: Write the current date in the letter to establish the timeline of the communication.
4. Begin with a formal salutation: Address the recipient as 'Dear Sirs/Madams' to maintain a professional tone.
5. State the purpose of the letter: Clearly state that the letter is a 'letter of comfort from the parent company for the subsidiary company.' This will provide clarity from the beginning.
6. Confirm awareness of facilities: Express acknowledgment of all facilities provided or to be made available to the subsidiary by the lender. This demonstrates an understanding of the financial arrangements.
7. Assure non-liquidation and creditor arrangements: Clearly state that the parent company will not permit the subsidiary to enter into liquidation or any arrangement with its creditors without fully discharging its liability to the lender. This ensures the lender's financial security.
8. Commit to repayment of indebtedness: Declare the parent company's commitment to taking necessary actions to ensure the subsidiary's payment of all indebtedness arising from the facilities. This reassures the lender of the subsidiary's financial responsibility.
9. Obtain consent for share disposal: Specify that the parent company will not dispose of any shares in the subsidiary resulting in a reduction of its shareholding without obtaining written consent from the lender or settling the subsidiary's liability in full. This protects the lender's interests.
10. End with a formal closing: Conclude the letter with 'Yours faithfully' to maintain a professional tone.
11. Sign the letter: Add the account job company's signature to authenticate the letter.
By following these steps, you can effectively use the 'Letter of Comfort (Keepwell) to Bank / Financial Institution' to provide assurance to the lender regarding the subsidiary's financial obligations.