2.7.2.2. Minimum Requirements
There are certain minimum requirements that all subordination agreements must follow:
• The loan must have a minimum term of one year (see exceptions for temporary subordinated loans in the following section).
• The agreement must be in written form (no oral subordination loans allowed) and binding to all parties.
• The agreement must indicate the amount of the loan.
• The agreement must expressly state the lender’s claims are subordinate to all other claims.
• The agreement must indicate that the cash proceeds must be added to the firm’s capital and are subject to the risks of the business.
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