Provisions of the explanatory note to the Bill
The current version of the Syndicated Loan Law provides for two forms of sub-participation, widely used in global practice—funded sub-participation and risk participation (unfunded sub-participation). However, some provisions of the Syndicated Loan Law are designed to apply exclusively to the funded sub-participation model, leaving certain aspects of the risk participation model outside the scope of regulation.

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

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

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

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

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