Define: Subordination Clause

A subordination clause is a provision in a legal agreement that establishes the priority of different creditors’ claims to a debtor’s assets.

The purpose of a subordination clause is to establish the order in which creditors will be paid in the event of a debtor’s default or bankruptcy.

Subordination clauses are commonly found in loan agreements, bond indentures, and other debt instruments.

A subordination clause can reduce the priority of a creditor’s claim, making it less likely that the creditor will be fully repaid in the event of a default or bankruptcy.

Yes, a subordination clause can be waived by the creditor if they agree to give up their priority status in exchange for other benefits, such as a higher interest rate or more favorable repayment terms.

A subordination clause establishes the order in which creditors will be paid, while a priority clause establishes the priority of a particular creditor’s claim over other creditors.

If a subordination clause is not included in a legal agreement, the priority of creditors’ claims will be determined by applicable law or by the terms of the agreement itself.

Yes, a subordination clause can be challenged in court if it is found to be unfair or if it violates applicable law.

A subordination agent is a third party appointed to oversee the implementation of a subordination clause and ensure that creditors are paid in the correct order.

To protect your interests in a legal agreement with a subordination clause, it is important to carefully review the terms of the agreement and seek the advice of a qualified attorney.