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Use of conditions precedent

In financing transactions, conditions precedent (known as CPs) are specific documentary and factual or circumstantial conditions that need to be fulfilled for funding to occur. They are not conditions to the facility agreement coming into effect. They are conditions to lending.

Conditions precedent are of crucial importance prior to:

1. •

   first drawdown under the facility, and

2. •

   subsequent drawdowns throughout the life of the facility

Conditions precedent are typically listed in a schedule to the facility agreement and provide the lender with a mechanism to ensure that certain documentary matters are dealt with and certain factual circumstances exist before funds are made available to the borrower.

For more information on the purpose of conditions precedent in a financing transaction and the types of conditions precedent that are commonly required by lenders, see Practice Note: Conditions precedent.

For further information on how conditions precedent fit within a transaction and on lending generally, see our Loan transaction toolkit,