Provisions of the explanatory note to the Draft Law
The current version of the Syndicated Loan Law provides for two forms of sub-participation, which are widely used in international practice — funded sub-participation and risk participation (unfunded sub-participation). However, certain provisions of the Syndicated Loan Law are drafted to apply exclusively to the funded sub-participation model, while leaving certain issues unregulated in the risk participation model.

The drafters of the Draft Law propose to address the existing gaps, making the Russian-law structure of risk participation more lender-friendly. In addition, the Draft Law:

• expands the list of circumstances under which the rights and obligations under a syndicated loan agreement are transferred from a member of the lending syndicate to an outside participant; and

• expands the list of persons that may act as members of a lending syndicate by including special-purpose companies in that list.

The initial version of the Draft Law has undergone certain changes, and the version adopted in the third reading provides for the following provisions.
Forms of sub-participation

The Draft Law supplements the definition of an external participation agreement by specifying that the external participant provides financing “within the time limits, in the cases and/or upon the occurrence of conditions.” This makes it possible to implement the structure of unfunded sub-participation — to make the provision of funds by the external participant to a member of the lending syndicate conditional on events that may include various circumstances stipulated by the sub-participation agreement (for example, such as the borrower’s payment default under the syndicated loan agreement).