The main document is the contract of insurance between the underwriter and the Vendor.

This is an irrevocable commitment to indemnify them in the event the purchaser fails to pay the due consideration on due date.

The underwriter’s willingness to insure a transaction of this nature is dependent on them being granted acceptable ‘soft debenture’ arrangements to secure its ability to recover payment from the purchaser following a claim, albeit potentially many years down the line.

There are separate agreements held between the underwriter and the vendor to those between the underwriter and the purchaser, which adds clarity to obligations.

Whilst the bank and the purchaser are not party to the insurance contract itself there is separate documentation required in relation to ranking and agreed protocols following a claim payment on behalf of the purchaser.

Underwriters invariably enter into an inter-creditor deed with the other parties who are providing credit to the new business.

This ensures that the vendor does not need to take a second or third charge behind all the preferential creditors such as the Crown, staff and banks as the vendor is simply to receive payment from the secured underwriter following default by the purchaser and recoveries are managed by the underwriter and bank.