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This article is written by Vani Panikkerpursuing Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.


There are a number of declarations and statements made by the borrower in a loan agreement. These representations and statements are relied on by the lender, to decide whether or not to enter into the loan agreement and to decide whether or not to advance money to the borrower. These declarations and statements are generally referred to as “representations and warranties”.

The lender may give some representations, however, the same is almost always limited to a minimum.


The following can be considered as a brief list of representations which can be  made by both parties to a loan agreement:

  • Status
  • Corporate Power
  • Structure Diagram
  • Legally Binding Obligations
  • Execution, Delivery, Performance
  • Authorisations
  • No litigation
  • No event of default
  • Financial Statement
  • Accuracy of Information
  • Insolvency
  • Pari Passu ranking
  • Immunity from suit
  • Tax liabilities
  • Not a trustee
  • Ownership of Assets
  • No enforcement of security interest
  • Cross guarantee
  • Financial indebtedness
  • Environmental laws
  • Intellectual Property
  • Disclosure
  • Authorised signatories
  • Shares
  • No reliance
  • Commercial benefit
  • Repetition
  • Reliance

Detailed explanation of each of the abovementioned representations:

  • Status

The primary and basic representation is of the status of the borrower. The borrower has to represent and state that it is a duly incorporated entity, and is set up in accordance with the laws of its place of incorporation, and it is validly existing under those laws and has the capacity to sue or be sued in its own name(s) and to own its own property and conduct its business as it is being conducted.

The lender would be agreeable to provide this representation as well.

  • Corporate Power

The borrower must also represent to the lender that it has the capacity to execute and deliver the loan agreement. The borrower must further state that it also has the capacity to comply with the obligations as provided in the loan agreement.

  • Structure diagram

The borrower has to confirm its corporate group structure. The representation would state that the corporate group structure provided to the lenders is valid and existing and accurately reflects the structure of the group as on the date provided.

  • Legally binding obligation

The loan agreement would be valid and legally binding obligation which would be enforceable against it in accordance with the terms of the document  

  • Execution, Delivery and Performance

The borrower has to confirm that the execution, delivery of, and compliance with its obligations under the loan agreement, shall not contravene any law or directive from any government organisation, the borrowers’ constitutional documents, any agreement or instrument to which the borrower is a party or any of its other obligations to any other person.

  • Authorisations

If any authorisations are required to be taken by the borrower, then it confirms that such authorisations have been obtained and they are valid and existing. The lender should ensure that the borrower states that the authorisations have been complied with and any failure to comply with the said authorisations would result in material adverse effect.

  • No litigation

The borrower should represent and confirm that as on the date of the agreement, there are no litigation, arbitration, dispute, criminal or administrative proceedings (pending, threatened or ongoing), the decisions of which may adversely affect the decision of the lender to grant the loan.

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No event of default

The borrower has to confirm that as on the date of the agreement, there are no events that constitute an event of default or may constitute an event of default as a result of the lender sanctioning the loan.

Financial statements

The borrower has to represent as follows:

  1. That the financial statements have been prepared according to the acceptable accounting standards;
  2. The financial statements gives a fair and accurate picture of the financial condition of the borrower;
  3. There have been no material adverse change in the business or the financial condition of the business of the borrower, since the date of the delivery of the financial statements;

Accuracy of information

The borrower has not failed to disclose any material factual information and/or any other material information which may prejudicially affect the decision of the lender.


No event of insolvency subsists as on the date.

Pari passu ranking

The borrower shall confirm that the payment obligations under the loan agreement will rank pari passu, i.e. The current syndicate of banks will have the priority to claim the securities in case further charge is created and with all the claims of all its unsecured and unsubordinated creditors.

Immunity from suit

Neither it nor its assets have immunity from the jurisdiction of the court or from any legal process.

Tax liabilities

No claims is likely to be asserted against the borrower with respect to taxes, which may cause a material adverse effect;

  1. All taxes have been filed within the time period stipulated by the relevant laws;
  2. The borrower has paid all its dues and taxes as on the date of the loan agreement.

Not a trustee

The borrower is entering into the loan agreement in its capacity and not as a trustee of any trust which is not specified in the agreement.

  • Ownership of assets

  1. It is the sole, legal and beneficial owner of all the secured property, which is the subject of the security granted or given by the borrower;
  2. None of its other property, other than as mentioned above is subject to security interest.

No enforcement of security interest

No person is currently appointed in relation to any of its property.

Cross guarantee

The borrower has not executed any guarantee in favour of any party.

Financial indebtedness

The borrower has not incurred any financial indebtedness other than as disclosed.

Environmental laws

The borrower has not incurred any environmental liability, which may prejudicially affect the decision of the lender or cause a material adverse effect.

Intellectual property

The borrower owns or is assigned all the right and title to use all the intellectual property required for the conduct of its core business.


The borrower has disclosed in writing all the facts and information known to it or which it believes could reasonably be expected to be affect the decision of the lender.

Authorised signatories

Any person specified as the authorised signatory is authorised by the borrower unless the said authority has been revoked and so informed to the Lender.


The shares, scrips, stocks or other interests which may be subject to the loan agreement are fully paid and not subject to any option to purchase or similar rights. The memorandum and articles of the borrower does not restrict or inhibit any transfer or creation or enforcement of the security.

No reliance

The borrower has obtained its own legal advice on the loan agreement and considers it appropriate.

Commercial benefit

The entering into and the performance of its obligations under the loan agreement is for the commercial benefit of the borrower and in the commercial interest of the borrower.


The borrower understands and acknowledges that:

  1. The lender has entered into the loan agreement in reliance on the representations and warranties made by the borrower;
  2. The representations and warranties shall survive the execution and delivery of the loan agreement and any modifications therein.


It is to be noted that generally the representations and warranties are made as on the date of the loan agreement. It would be ideal to state that the representations and warranties are to be repeated on days (as required) during the continuance of the loan agreement, for example, on each interest payment date; or on any other date as agreed to by the parties to the loan agreement. Having the representation and warranties on any other date as agreed to by the parties can be arduous on the borrower, as it has to ensure that the representations and warranties remain true and correct. However, the reason a continuing representation and warranty is sought to ensure the lender that the information basis which the loan was granted remains accurate and that the borrower maintains a good credit risk profile.

The borrower must remember that if the loan agreement seeks for a repetition of the representations and warranties, then the borrower must ensure that such repetitions are with reference to the current and existing facts and circumstances of the borrower. For example, if the borrower makes a representation about its financial statements, then such a repeated representation will be made with reference to the most recent financial statements of the borrower.

Repetition will only apply to any representations made by the borrower; not those made by the lender.

It is to be noted here that the lender may be agreeable to give representations only with respect to its status and corporate power.


When a party (borrower) to a transaction makes a false statement to the other party (lender) to the transaction, which would induce the other party to enter into a contract, which otherwise the party would not have entered into, is considered as Misrepresentation. For example, under certain circumstances, false statements or promises made by a borrower regarding the profitability of its business may constitute misrepresentation.

There are certain criteria that must be fulfilled to prove a misrepresentation. These include:

  • A false statement of an existing or a past fact has been made by one party to the transaction;
  • Such false statement was made to the aggrieved party (in the current situation, the lender); and
  • Such false statement induced the lender to enter into the transaction.

Remedies for misrepresentation

If it is proven that misrepresentation was made by the borrower, then the lender has the following remedies:

      1. remedy of rescission (viz., the parties would be restored to the position they were in prior to entering into the contract); and
      2. occasionally the court may award damages depending on the type of misrepresentation.

In addition, if the representation is found to be a term of the contract then the normal remedies for breach of contract will apply (including specific performance, damages and/or termination, where applicable).

Event of Default

Apart from the abovementioned remedies, if the borrower has made a misrepresentation which may be constituted as an event of default under the loan agreement (the lender should ensure that the loan agreement specifically provides that any misrepresentation shall be considered as an event of default).

In the event such a provision is provided for in the loan agreement, then a misrepresentation shall be considered as an event of default and when the same occurs, the loan shall become due and payable immediately upon demand by the lender and any security so provided by the borrower becomes enforceable.


There are many important representations and warranties in a loan agreement.

Representations and warranties are a very important clause and, due to the repercussions of misrepresentation, the borrower must ensure prior to entering into a loan agreement that any representations and warranties in the loan agreement are true and, if they are to be repeated, will remain true. The misrepresentations are one of the main causes for the acceleration of syndicate loans. They are very sensitive to cross-defaults.

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.   

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