Consent payments: are they lawful?

Are ‘payments’ offered to loan note holders to encourage their consent to documentation changes allowed?

In an interesting recent case, Sergio Azevedo v Imcopa Importacao, the validity of ‘consent payments’ offered to loan note holders to secure their votes in favour of certain amendments to the terms of the notes was considered, and the result may be surprising to some.

Imcopa had issued loan notes subject to the terms of a trust deed, which permitted the notes to be varied, provided that 75 per cent of the noteholders consented to the amendments. All amounts owing under the loan notes were to be paid on a pari passu — equal footing — basis…

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