Michigan Laws 445.1593 – Post closing solvency covenant; prohibited use
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Terms Used In Michigan Laws 445.1593
- Guarantor: A party who agrees to be responsible for the payment of another party's debts should that party default. Source: OCC
- Nonrecourse carveout: means a specific exception, if any, to the nonrecourse provisions set forth in the loan documents for a nonrecourse loan that has the effect of creating, if specified events occur, personal liability of the borrower or a guarantor or other surety of the loan for all or some amounts owed to the lender. See Michigan Laws 445.1592
- Nonrecourse loan: means a commercial loan secured by a mortgage on real property located in this state and evidenced by loan documents that meet any of the following:
(i) Provide that the lender will not enforce the liability or obligation of the borrower by an action or proceeding in which a money judgment is sought against the borrower. See Michigan Laws 445.1592Post closing solvency covenant: means any provision of the loan documents for a nonrecourse loan, whether expressed as a covenant, representation, warranty, or default, that relates solely to the solvency of the borrower, including, without limitation, a provision requiring that the borrower maintain adequate capital or have the ability to pay its debts, with respect to any period of time after the date the loan is initially funded. See Michigan Laws 445.1592
(1) A post closing solvency covenant shall not be used, directly or indirectly, as a nonrecourse carveout or as the basis for any claim or action against a borrower or any guarantor or other surety on a nonrecourse loan.
(2) A provision in the documents for a nonrecourse loan that does not comply with subsection (1) is invalid and unenforceable.