Asset Related Covenants

Are intended to ensure the maintenance of a minimum asset base by the borrowers. Included in this set of covenants are:

Maintenance of working capital position in terms of a minimum current ratio.

Restriction on creation of further charge on asset.

Ran on sale of fixed assets without the lenders concurrence/approval.

Liability Related Covenants

May, inter alia, include:

Restrain on the incurrence of additional debt/repayment of existing loan, say without concurrence/prior approval of the lender/financial institution.

Reduction in debt-equity ratio by issue of additional capital, and

Prohibition on disposal of promoters shareholding.

Share This