A proposed ownership change may affect the waiver you rely on
Check a proposed ownership transaction against event-based conditions in an existing covenant waiver, without assuming relief continues until its calendar end date.
Corporate Recovery Partners
01 / 06
The calendar date is not the only condition
A company has a documented covenant waiver and is considering bringing in a new owner. The director sees that the waiver's stated end date is months away and assumes it will remain available throughout the transaction. Read the whole document with the adviser. Its operation may depend on events or conditions as well as a date.
Provide the lender documents and a clear description of the proposed ownership change to the lawyer. Identify what would change, when and which parties are involved. Keep an exploratory discussion separate from a signed transaction. Do not assume a transfer between familiar people is irrelevant simply because the business would continue using the same trading name.
Business.gov.au recommends understanding contractual obligations and obtaining advice about unclear terms. Ask whether this waiver or the related facility contains any provision relevant to the proposed event. This article does not state that ownership changes automatically terminate waivers or require consent in every loan. The actual documents and circumstances must determine the enquiry.
Imagine a waiver refers to a particular ownership position, while a proposed transaction would alter it. Ask the adviser what that reference means and what communication or approval is needed, if any. Do not treat an acknowledgement from a bank contact as an agreed amendment. Preserve the request and actual response with the transaction file.
Keep the financial plan conditional where necessary
If the ownership proposal and continued lender relief depend on unresolved decisions, show those dependencies in the funding plan. Avoid spending anticipated investment proceeds on the assumption that all existing concessions will continue unchanged. Give the investor and other authorised decision-makers an accurate account of what is confirmed, subject to appropriate confidentiality and professional advice.
If the transaction proceeds, retain the relevant lender confirmation or advice and update the covenant calendar and conditions register. If it does not proceed, preserve that outcome as well. The useful review checks the event that is actually being proposed, so the business does not rely on a distant end date while overlooking another condition in the relief arrangement.
