4.1.8.1. 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 that 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.
Secured demand note agreements carry the same requirements stated above, as wel