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Senior Partner
Senior Partner, Solicitor
Category: UK Law
Satisfied Customers: 13325
Experience:  30 years experience in business law and related topics such as employment law
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On 01.01.2005 companies signed unsecured loan agreement for

Resolved Question:

On 01.01.2005 companies signed unsecured loan agreement for 20 years. After 8 years the Lender is not able to pay interests but can pay main debt in the future.
Are there any restrictions why it is not possible under English law to waive on 01.08.2013 all accrued interests from 01.01.2005 and/or apply 0% interest from 01.01.2005 as well as extend the agreement for next 50 year (with 0% rate)?
Does it need to be made in the form of deed only?
Submitted: 3 years ago.
Category: UK Law
Expert:  Senior Partner replied 3 years ago.
Thank you for your question. I take it you mean the borrower is unable to ay interest? It is possible for the lender to waive interest and extend the loan agreement. If there is not consideration given then it is probably better by deed. The only potential legal issue is the potential for a tax charge if the lender and borrower are connected and the interest waiver has a beneficial tax effect for one party - but it seems unlikely. Otherwise the parties are free to do as they wish if it is seen as commercially sensible to restructure the loan
Customer: replied 3 years ago.
"I take it you mean the borrower is unable to ay interest?" Yes

"If there is not consideration given then it is probably better by deed."

Why "probably" and what are negative consequences if agreement is not witnessed except difference in limitation period?
Expert:  Senior Partner replied 3 years ago.
If there is no consideration then it could be unenforceable. I said probably because actually there is usually a benefit to the lender in restructuring because to enforce the original agreement might lead to a default so that is really enough. I am cautious so I would execute a restructure as a deed just in case.
Senior Partner and 2 other UK Law Specialists are ready to help you
Customer: replied 3 years ago.
what does it mean "could be unenforceable"?
Expert:  Senior Partner replied 3 years ago.
Well ultimately it is a matter for the court to determine if there is consideration or indeed if the lender is estopped from denying the waiver of interest. English common law is not black and white and a lot depends upon the particular facts . My view is to adopt the cautious approach and execute as a deed to avoid problems later.
Senior Partner and 2 other UK Law Specialists are ready to help you