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Loan Participation Agreement Template for Saudi Arabia

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Key Requirements PROMPT example:

Loan Participation Agreement

"I need a Loan Participation Agreement for a 40% participation in a Sharia-compliant real estate financing facility, where our Saudi bank will be the participant acquiring the participation from an international bank, with the transfer expected to complete by March 2025."

Document background
The Loan Participation Agreement is a crucial document in Islamic banking and finance transactions in Saudi Arabia, used when a financial institution wishes to share the economic benefits and risks of a loan while maintaining Sharia compliance. It's particularly relevant for large-scale financings where risk diversification is desired, or when institutions seek to manage their exposure limits. The agreement must navigate both the requirements of the Saudi Arabian Monetary Authority (SAMA) and Islamic finance principles, making it distinct from conventional participation agreements. It typically includes detailed provisions on profit-sharing mechanisms, payment procedures, and administrative responsibilities, while ensuring all aspects align with Sharia principles. This document is essential for transactions involving multiple financial institutions in the Saudi market, whether domestic or international, and requires careful consideration of both regulatory compliance and Islamic finance structures.
Suggested Sections

1. Parties: Identification of the Grantor (original lender) and Participant(s), including their regulatory status

2. Background: Context of the underlying loan, the participation arrangement, and confirmation of Sharia compliance

3. Definitions and Interpretation: Key terms, including Islamic finance concepts, and interpretation principles

4. Participation and Risk Sharing: Core terms of the participation, including percentage, profit-loss sharing structure, and Sharia-compliant mechanisms

5. Payment Mechanics: Process for sharing payments received from the borrower, settlement procedures, and payment priorities

6. Rights and Obligations of the Grantor: Grantor's duties in loan administration, reporting, and maintaining Sharia compliance

7. Rights and Obligations of the Participant: Participant's role, funding obligations, and limitations on interference with loan administration

8. Representations and Warranties: Standard and Sharia-specific representations from both parties

9. Information Rights: Participant's rights to receive information about the underlying loan and borrower

10. Administration of the Underlying Loan: Procedures for loan management, amendments, and enforcement actions

11. Regulatory Compliance: SAMA requirements, AML obligations, and other regulatory matters

12. Termination: Events triggering termination and consequences

13. Governing Law and Jurisdiction: Saudi law application and dispute resolution procedures

Optional Sections

1. Transfer and Assignment: Include when participation interests may be transferred to third parties

2. Sharia Board Approvals: Required when parties maintain their own Sharia boards and need specific approval procedures

3. Set-off Rights: Include when parties have multiple relationships requiring set-off provisions

4. Tax Provisions: Required when international participants are involved or specific tax structures apply

5. Increased Costs and Changes in Law: Include for longer-term participations where regulatory changes may impact the arrangement

6. Multiple Participants Provisions: Required when there are multiple participants requiring voting and decision-making procedures

Suggested Schedules

1. Details of the Underlying Loan: Key terms, conditions, and payment schedule of the underlying loan

2. Form of Payment Notice: Standard form for notifying participants of payments received and distributions

3. Administrative Details: Contact information, account details, and communication procedures

4. Form of Transfer Certificate: Standard documentation for transferring participation interests

5. Sharia Principles and Structure: Detailed explanation of Islamic finance structure and compliance requirements

6. Required Regulatory Notices: Templates for notices required by Saudi regulations

7. Calculation Procedures: Methods for calculating profit shares and other financial terms

8. Form of Confidentiality Undertaking: Standard confidentiality agreement for potential transferees

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions






































Clauses




























Relevant Industries

Banking

Islamic Finance

Financial Services

Investment Banking

Corporate Finance

Project Finance

Infrastructure Finance

Real Estate Finance

Energy Finance

Aviation Finance

Relevant Teams

Legal

Finance

Treasury

Risk Management

Islamic Banking

Corporate Banking

Credit

Compliance

Operations

Documentation

Syndications

Investment

Relevant Roles

Chief Financial Officer

Head of Islamic Banking

Sharia Compliance Officer

Legal Counsel

Finance Director

Treasury Manager

Risk Management Officer

Credit Manager

Syndications Manager

Investment Officer

Corporate Banking Manager

Regulatory Compliance Officer

Documentation Manager

Transaction Manager

Industries








Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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