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Alex J.
Alex J., Solicitor
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Experience:  Solicitors 2 years plus PQE
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I subordinated my existing loan to a company, to a loan agreement

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i subordinated my existing loan to a company, to a loan agreement with a new investor/shareholder loan. The company have made no repayments in line with that contract and the investor/shareholder has not taken action for recovery as allowed in the contract.Instead it has organised further loans from another source and a redistribution of shareholdings.
There would seem no doubt that the company is in breach of its contract with the new investor/shareholder so my question is does this cancel my subordination to a loan that is not being repaid.
Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you. Is your loan a secured loan? What is it due for repayment taking into account the subordination? Kind regards AJ
Customer: replied 2 years ago.
hi i have a loan agreement dated may 2013- on which interest should have been paid- the loan is further subordinated to HSBC.The new investor allowed interst as a permitted payment under the subordiation and the loan they made to the company has afinal payment date of may 2017 -thank you ps
Hi, Thank you. Just to clarify, the company has stopped paying interest on your loan? And accordingly you are questioning whether this affects the subordination? Do you have a deed of priority or something similar that details the subordination?
Customer: replied 2 years ago.
hi the company never paid any money on my loan agreement-- i have a subordination deed.
Customer: replied 2 years ago.
to clarify-- i signed a loan repayment contract which provided for the repayment of interest and there was a clause requiring my subordination for the loan [capital] to a future investor providing a bona fide loan on commercial terms. a loan was made by a new investor who became a shareholder - isubordiated my loan to them in a deed which allowed interest payments. none have been made and the company has not paid on the loan to which i am subordinated so if they are in breach of this contract where does that leave my subordiation?
Customer: replied 2 years ago.
hi these things must take time and you may have been called away but i am wondering if i have lost contact with you somehow-?ps
Customer: replied 2 years ago.
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Hi, Thank you. My apologies for the delay. Have you written to the company to make a formal demand for the outstanding interest? Does the deed of priority say that priority is cancelled by non payment?
Customer: replied 2 years ago.
hi i am currently pursuing payment through the small claims court - amongst other things my claim is rejected on the basis of the subordi nation deed ,which makes little sense as it allows interest payments as a permitted payment-- there is no reference in the deed to cancellation of priority if their loan payment is not met- i am required to notify of non paymment of my interest-i did- .I also have a copy of their loan agreement to the company listing all the events of default -they were supposed to tell me of any restructuring but they did not. so thats what makes me think it has been followed through as a bona fide loan and could end my subordiation ps
Customer: replied 2 years ago.
sorry should read---NOTbeen followed....
Hi, Thank you. In the County Court Claim, did you claim for the full amount or just interest? Kind regards AJ
Customer: replied 2 years ago.
i claimed for an amount of interest to be set against the total interest that has accrued since May 13--in the absence of being able to get statements from the company ,i worked out my own figure but because i thought they might dispute them I actually pressed for the difference between some previously agreed figures.i stated this to the court This resulted in a figure just under £10,000 and i did not realise when i did this, that it put me in the fortuitous position of falling within the band where legal costs are restricted thanks ps
hi, Thank you. So what happened did the court reject your claim? Have you considered issuing a statutory demand for the interest? Kind regards AJ
Customer: replied 2 years ago.
the company appealed to the court to dismiss the claim15/10/2015- the judge found that" i had a reasonable chance of success "the case was scheduled for 3March 2016 but the company appealed for an adjournment for 2 months based on the ill health [no nhs doctor 's certificate ]of its main and only witness--the judge allowed an adjournment for 1 month so i am awaiting a new date from w/c 4april 2016,not yet received but the defence is to lodge pagnated documents 7 days before.thanksps
Hi, Thank you. So they tried to strike your claim out, you may have difficulty in claiming the capital amount but you can still pursue the interest amount. Does the company currently have the assets to repay you? Kind regards AJ
Customer: replied 2 years ago.
hi i was,and am to some extent,although i am 75,prepared to settle for an interest payment until the bank are paid off.-i know i am subordinated to the bank loan that is being paid down and the bank would allow interest payments.The company are also pleading the case for no funds to pay me and they have had to take measures to cut expenses and make redundancies .they have provided financial info to the court but it is incomplete and i cannot get them to provide the missing stuff for the court, Also they have spent around 50k on barristers and solicitors to date and we havent got to court for trial yet - for a claim under £10.000- the judge at the preliminary hearing expressed concern at the expenditure but they have continued- the adjournment barrister must have added considerbly to costs they have done this because if a ruling is made agaist them it will be a regular payment..i have maintained that if they cannot afford to pay a regular legitimate payment they are insolvent--The shareholders who have come on board since my loan agreement are extremely wealthy-i am a nontaxpayer- they have pumped money into a struggling business and basically do not want it to fold..They know they can attemt to bully me - in the past they have tried to buy out my loans at a 90% discount..thanksps
Hi, Thank you. The only problem here is it sounds like you are accruing interest but the company is teetering on the brink, if the investors pulled out would you receive any money? Kind regards AJ
Customer: replied 2 years ago.
possibly not -- it is the threat i have been under for so long -the investors are also shareholders and the bank are satisfied with the level of security - the auditors also refer to there being no reason to question continued investor support thanks-thaks ps
Hi, Thank you. Unfortunately you cannot re organise the priority and subordination because the interest is no longer being paid, if you want to be paid the interest you either need to pursue the Judgment (i.e court) or issue statutory demand for the money. A statutory demand could be another option as it would put the company under enormous pressure due to the threat of insolvency. Is the accrual of interest in anyway in dispute?
Customer: replied 2 years ago.
hi i am pursuing the judgement and i cannot issue a statutory demand because of a clause in the loan postponement with the bank. i question whether the subordination can continue to apply to a loan to which commercial terms have not applied and the investor did not tell me of any reorganisation.
the company have defaulted on their loan from the investor/shareholdert-hey are in breach of their contract--the investor has not taken action as allowed by the terms of the loan but has arranged a further loan from another source.the loan contract was set to end in MAY2017- does my subordination end then if no payment has been made and they have not followed the terms of the contract ---thanksps
Hi, Thank you. I would really need to see a copy of the deed of priority - technically most loans and contracts contain a indulgence/non waiver clause and therefore a party (i.e creditor) can be flexible on contractual breaches without waiving or prejudicing any future rights. Are there any conditions attached to the priority? Conditions that might prevent unfair prejudice?
Customer: replied 2 years ago.
hi if you are willing to look at the deed i could arrange to send it-i'm afraid i cannot interpret its content with regard to yor questions.
i also have a copy of the loan contract between the company and the investor, the one to which i am subordniated and has not been pursued..Can you say if the loan has not been paid by the agreed date, when my subordination would end- if it is when the loan is paid and they will not pursue it , that would appear to be never and i cannot understand how this could be a fair contract .i have written to the investor /shareholer but he will not reply thank you ps
Hi, Thank you. Can you post copies of both documents into this link or send them to***@******.*** for my attention?Kind regardsAJ
Customer: replied 2 years ago.
Hi thank you-- I will do this as soon as possible but I am out for most of today kind regards ps
Hi, No problem. Please send it at your convenience and I will look our for it. Kind regards AJ
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Customer: replied 2 years ago.
Hi I have tried to send to the email ***@******.*** [checked carefully] but delivery failed- is there an alternative email- if I was more computer literate I should be able to - add files - but I am unable to do this thank you ps
Customer: replied 2 years ago.
Hi are we still in contact thank you ps
Customer: replied 2 years ago.
Hi with some help I was able to email files this morning ,separately so I hope you will get them thank you ps
Customer: replied 2 years ago.
(Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Hi, Thank you. The emails take a little while to filter down. I will chase them down from customer services now and let you know as soon as I have received them. Kind regards AJ
Hi Thank you for your patience. I have received the papers. I will review them today and revert to you as soon as possible. Kind regards AJ
Customer: replied 2 years ago.
Thank you very much ps
Hi, Thank you for your patience. I have looked at these documents and there is nothing that would obviously waive your subordination based on the facts you have provided. Your loan interest does accrue even in default as you have rightly pointed out. As this is just a question and answer service, if you are going to try and challenge the subordination of the loan then you need to obtain more formal legal representation. We cannot act for people on this site and the background to this matter may contain more details and facts than we cannot discuss confidentially. Kind regards AJ
Customer: replied 2 years ago.
hi thank you- I realise that this is complex-and I understand what you say about the waiver . No payment has been made according to the loan schedule and as I read it the final payment is due in May 2017-will my subordination end on that date? Thank you ps
Hi, Thank you. I suppose you could interpret it that way, but ask yourself, when you originally agreed the subordination what was the intention? Were you lead to believe that your loan would subordinate until May 2017? I would be surprised if this was the intention of the other lender.
Customer: replied 2 years ago.
Hi when we agreed the subordination it was supposed to be, as per the loan agreement "to a bona fide loan on commercial terms" The copy of the loan agreement shows the terms indicated a final payment in May 2017.We found this date out later,when we got a copy of the loan but at the time assumed there would be a date when it would end ,just like the HSBC postponement,which has an end date and is being paid down regularly . In actual fact at this time we had no contact with the lender and the company were expressing confidence about expansion and paying that loan off quickly- you will see naiveity and stupidity shouting to you-I trusted people far too much and at this late stage I am trying to preserve the little I have left to do battle! thank you ps
Customer: replied 2 years ago.
Hi I replied on 4April to your question but have not since had a reply----- to restate- if my loan is subordinated to another loan that has an end date, how is the end of my subordination decided if they do not pursue it ?Thank you ps
Hi Thank you. I do not think a subordination will end just because the loan is not repaid at the end of the term. I haven't seen the other loan so cannot comment, but normally these contracts will contain a non waiver clause - this means they can waive their rights or indulge late repayment without prejudicing their rights to be repaid. Is your loan due to be repaid next year as well?
Customer: replied 2 years ago.
hi thank you -I did send the other loan between Prime and Defence- I will try to resend. My loan cannot be repaid until subordination to HSBC also ends - I think this is in around 3 years--this loan is being paid down by Defence in line with their agreement with the bank .Defence is also paying down a loan from Investec but as you can see ,I have an agreement to pay my interest on my loan until subordination ends and they are contesting payment on legal arguments in the contract.
They got an adjournment from 3/3/2016 -the judge allowed I month but I am now lead to believe that it will not be relisted until July.-so frustrating ps
Hi, Thank you. I would be surprised allowed the loan to carry on after the repayment date was due. Again the issue comes back to what was intended when the agreement was signed - was everyone clear that you would be paid interest until the subordination ends? Are they objecting to the interest accruing or just objecting to paying it?
Customer: replied 2 years ago.
hi thank you ---When the agreements were signed--1, loan agreement and 2, subordination to Prime-[ until their loan stated to be £250,000 was repaid] it was made clear verbally that they were vehicles to provide interest payments .Although my letters are never answered they are objecting through solicitors to paying interest. Their reasons for non-payment are the wording of documents. The existing loan postponement with HSBC referring to no monies being paid to me is now stated to refer to include interest payment. Prior to the loan agreement interest had been paid and the bank have reconfirmed they have no objection to interest being paid.The judge at the preliminary hearing said the loan postponement with HSBC was drawn up to protect the bank but the solicitors view was and still is that HSBC cannot change something that the company believes is protecting them. It is complicated but the contracts drawn up to include payment of interest to me refer to the postponement which they say does not allow payment! Should they fail to convnice the court of this --and the judge said I have a reasonable chance of success they say they have no funds .they have not produced all required figures and what they have produced shows when they did have funds but did not pay kind regardsps
Hi, Thank you. It is difficult for me to propose the best course of action because there are many considerations here, for example by suing the company you are also potentially devaluing your shares if the company was forced into an insolvency procedure. I believe your best course of action would be to obtain formal legal advice, this really is intended for question and answer purposes. Having a solicitor act for you and send correspondence for you will put pressure on the otherwise to respond to your claims and requests for information, especially if they think you are being properly advised. If you had assurance you were repaid in May 2017 would you continue with the court action for example?
Customer: replied 2 years ago.
hi thank you---I do not have any shares,prior to the new investor/shareholder making his loan ,I was voted off the board [as i could not make further loans]enabling the buy my shares by force. The case is going through the small claims and as my claim is for under £10000,being only for part of the interest owed my costs are minimal so I will continue I had assurance that the agreements were being set up so that interest could be paid but at that time I did not have a copy of the co's agreement with Prime or reason to consider how the end date would be affected if the loan was not paid.
My original question refers to how my subordination is affected by the lender not pursuing payment and therefore leading on to when my subordination will finish.there seems no simple answer to this and it is not easy to understand the contract wording and I guess it will be the judges interpretation that will decide it. The actual total interest now due is more like £100,000 obviously rising each month. It is due from may 2013 and the claim could be said to cover May-july 2013. Would I be able to issue another claim now for under £ 10,000 stating it was for august -October 2013.?My point is that the company are relying on just one witness and the judge at the adjournment hearing asked why they had not asked for the director/shareholder who came to my house with all the assurances of interest payments to appear.Presumably second time around I could ask for this ?kind regards ps
Hi, Thank you. Yes you could ask the other director and shareholder to submit a witness statement, or you could submit your own statement detailing what was said to you. On what I have seen it seems like the subordination ends when the loan is repaid. What I do not have is any knowledge of the background facts I do not know anything about the conduct of the other parties that would lead me to believe this could be challenged. I am not sure I can assist you any further with this, I am going to opt out to see if another expert can offer a further opinion? Kind regards AJ
Customer: replied 2 years ago.
hi thank you for all your attention-I realise there are a lot of things to consider which you have no knowledge of in my case. I look forward to the further opinion thanks again PS