Change of Control Provision Credit Agreement

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    A change of control provision is a common feature in credit agreements. If the borrower goes through a significant change in ownership or control, this clause will typically trigger events that will allow the lender to act in its best interest.

    A change of control provision is designed to protect the lender from undue risk and ensure that it will be repaid in the event of a significant change in ownership or control. The provision typically includes a number of specific requirements that must be met before the lender can take action. These requirements can include a change in the majority ownership of the borrower, a change in the management structure of the borrower, or a sale of a significant portion of the borrower`s assets.

    One of the key benefits of a change of control provision is that it provides the lender with a degree of protection against the risk of default. This can be especially important if the borrower is a smaller company or if the borrower has a higher risk of default.

    Another important consideration when dealing with a change of control provision is the potential impact on the borrower. This provision can limit the borrower`s flexibility in terms of its ability to make changes to its business model or its organizational structure. It can also limit the borrower`s ability to raise additional capital or take on new debt.

    Despite these limitations, a change of control provision can be an important tool for lenders to protect themselves against risk. By including this provision in their credit agreements, lenders can ensure that they will be repaid in the event of a significant change in ownership or control. For borrowers, it is important to understand the implications of this provision and to work with the lender to ensure that it does not unduly limit the borrower`s ability to grow and succeed.

    In conclusion, a change of control provision is an important feature in many credit agreements. It provides lenders with protection against the risk of default and ensures that they will be repaid in the event of a significant change in ownership or control. For borrowers, it is important to understand the implications of this provision and to work with lenders to ensure that it does not unduly limit the borrower`s ability to grow and succeed.