TRW & Co · Banking, Finance & Restructuring
Private Credit and Direct Lending Lawyers in London
Private credit lawyers London sponsors, companies and credit funds instruct structure direct loans, negotiate the terms that decide real flexibility, and manage security, tax and enforcement risk. With the FCA reviewing valuations, the Bank of England stress-testing private markets and fund regulation being rewritten, getting the documents right matters more in 2026 than ever.
Key pointIn UK private credit the headline leverage ratio matters less than the EBITDA definition behind it, and the withholding tax mechanics matter more than most borrowers expect: since HMRC paused its concession in 2026, paying interest gross before clearance can create a direct tax cost.
At a glance
No dedicated regime
Lending to companies is generally unregulated in the UK; regulation attaches to fund managers under the AIFM regime and to banks lending to and alongside funds.
Reform of fund rules
HM Treasury and the FCA consulted in July 2026 on a new three-tier AIFM regime with a new sourcebook, expected to take effect in 2028.
Supervisors are watching
The FCA reviewed private market valuation practices in 2025 and the Bank of England launched a private markets exploratory scenario in December 2025.
21-day registration
Charges granted by UK companies must be registered at Companies House within 21 days of creation or they are void against an insolvency officeholder and creditors.
Withholding tax risk
Overseas lenders need an HMRC direction before interest is paid gross; HMRC paused its concession for premature gross payments in 2026.
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What private credit lawyers London borrowers and funds instruct actually do
Private credit is lending by non-bank investors, usually credit funds, insurers and pension-backed vehicles, directly to companies and other borrowers. The private credit lawyers London sponsors, management teams and funds instruct structure and negotiate those loans, take and perfect security, manage the tax and regulatory points, and act when a loan comes under stress.
In the UK mid-market, direct lenders now finance a large share of sponsor-backed buyouts, refinancings and growth deals that banks once dominated. The same managers also provide asset-based, real estate, infrastructure and specialty finance, and lend to funds themselves through net asset value (NAV) and subscription facilities.
For a borrower, private credit usually offers speed, certainty and flexible structures at a higher price than bank debt. For a lender, it offers yield and control, but with concentrated exposure and no syndication exit. The legal work is about allocating those trade-offs precisely in the documents.
The legal and regulatory framework
No dedicated private credit regime
The UK has no standalone statute for private credit. Commercial lending to companies is generally not a regulated activity under the Financial Services and Markets Act 2000, although lending to individuals can be (for example, consumer credit or a regulated mortgage contract). Regulation instead attaches to the people who run the money and to the banks that lend to and alongside them.
Fund manager regulation
Most UK private credit funds are alternative investment funds whose managers are authorised under the Alternative Investment Fund Managers Regulations 2013 and the FCA's rules. Unlike the EU, the UK does not impose a specific loan-origination regime on funds. The EU's revised AIFMD, applying from April 2026, does: it introduces leverage, retention and concentration rules for EU loan-originating funds, which matters to any UK manager running EU vehicles.
UK reform is under way. In July 2026 HM Treasury published a draft statutory instrument and the FCA consulted (CP26/28) on replacing the inherited regime with a three-tier structure and a new FCA sourcebook, with changes expected to take effect in 2028. A parallel consultation on fund reporting proposes bespoke data for loan origination funds. Our article on AIFM regime reform tracks the detail.
Supervisory focus: valuations and system risk
The FCA's multi-firm review of private market valuation practices (March 2025) found weaknesses in governance, independence and conflict management, and in ad hoc valuations under stress. Private credit managers should expect valuation policies, side letters and conflicts registers to be tested.
The Bank of England launched its second system-wide exploratory scenario in December 2025, focused on private markets, and ran its first scenario round from June 2026. It examines how banks, funds and investors would behave together in a downturn. The PRA has separately pressed banks on their exposure to private markets through fund finance and leveraged lending.
Security, insolvency and investment screening
A charge granted by a UK company must be registered at Companies House within 21 days of creation under section 859A of the Companies Act 2006, failing which it is void against an administrator, liquidator and creditors. Security over cash and shares can benefit from the Financial Collateral Arrangements (No. 2) Regulations 2003, including the right of appropriation. Insolvency outcomes are shaped by the Insolvency Act 1986 and the Corporate Insolvency and Governance Act 2020.
Under the National Security and Investment Act 2021, taking share security without transferring title is not a notifiable acquisition. Enforcement can be: a receiver or lender acquiring voting control over a target active in a sensitive sector may need clearance first. See our foreign investment and NSIA practice.
Tax: withholding and holding structures
UK borrowers must generally deduct income tax from yearly interest paid to overseas lenders under section 874 of the Income Tax Act 2007. Exemptions include the quoted Eurobond exemption (section 882) and the qualifying private placement exemption (section 888A), and treaty relief, which requires an HMRC direction before interest is paid gross. In early 2026 HMRC paused a long-standing concession for borrowers who paid gross too early, so the timing of directions now carries real cash risk.
Many credit funds hold loans through a qualifying asset holding company (QAHC), a regime introduced by the Finance Act 2022 that is entered by notification to HMRC and gives investors a tax outcome broadly similar to holding the assets directly.
Private credit structures compared
Private credit lawyers London borrowers consult early will compare the main structures on cost, flexibility and control. The right answer depends on leverage, cash flow profile, sponsor plans and the exit horizon.
| Structure | How it works | Typical use | Key legal point |
|---|---|---|---|
| Unitranche | Single term loan from one lender or a small club, blending senior and junior pricing | Sponsor buyouts and add-on acquisitions | An agreement among lenders may split the loan into first-out and last-out tranches behind the borrower's back |
| Super senior revolver plus unitranche | A bank provides a revolving facility ranking ahead on enforcement proceeds | Working capital alongside a fund term loan | Intercreditor terms on enforcement instructions, standstill and the payment waterfall |
| Holdco PIK or second lien | Subordinated debt with interest capitalised rather than paid in cash | Extra leverage or dividend recaps | Structural subordination, release mechanics and NSIA risk on share enforcement |
| Asset-based and specialty finance | Borrowing base lending against receivables, inventory, loan books or royalties | Lenders to lenders, consumer finance, IP-rich businesses | True sale, eligibility criteria, data and servicing rights |
| NAV facility | Loan to a fund secured on its portfolio or holding vehicles | Liquidity, follow-on investment or distributions at fund level | Fund document limits, LP consent and concentration tests |
| Subscription line | Loan secured on investors' uncalled commitments | Bridging capital calls | Security over the right to call capital and investor-specific exclusions |
Key terms private credit lawyers London clients negotiate
Direct lending documents usually start from a Loan Market Association template adapted for the mid-market (see our guide to the LMA facility agreement). The commercial battle sits in a small number of clauses.
Covenants and EBITDA definitions
Many unitranche loans keep a single maintenance covenant, usually leverage, tested quarterly, while larger deals may be covenant-lite. The EBITDA definition matters more than the ratio itself: caps on synergies and cost-saving add-backs, the look-forward period and who certifies them decide how much headroom really exists. Equity cure rights, including whether cures count towards EBITDA and how often they can be used, are closely negotiated.
Pricing, PIK and call protection
Funds price over SONIA or another risk-free rate, often with a floor. A PIK toggle lets the borrower capitalise part of the interest for a period. Call protection, through prepayment premiums or a make-whole, protects the lender's return if the loan is refinanced early, and is a frequent point of friction when a sponsor exits sooner than planned.
Transfers and lender identity
Borrowers want control over who holds their debt, through consent rights, white lists and disqualified lender lists that exclude competitors and distressed investors. Lenders want liquidity and the freedom to transfer to affiliates and financing providers, including on a default. Each answer affects withholding tax, because a new lender's treaty status must be cleared with HMRC before it is paid gross.
Flexibility baskets and portability
Sponsors seek permitted debt, permitted acquisitions and restricted payments baskets that grow with EBITDA, plus portability so the loan survives a change of control. Lenders increasingly add protections against value leakage to unrestricted subsidiaries and against non-pro rata liability management transactions.
The process from term sheet to funding
- Mandate and term sheet. The borrower or sponsor agrees headline terms with one or more funds, including leverage, pricing, covenants, call protection and exclusivity. Legal input at this stage avoids reopening points later.
- Due diligence. The lender's advisers review financial, tax, legal and commercial reports, often relying on the sponsor's vendor diligence with reliance letters.
- Structure paper and tax review. The parties settle the group structure, guarantor coverage test, withholding tax analysis and any QAHC or treaty route.
- Documentation. Facility agreement, intercreditor agreement or agreement among lenders, security documents, fee letters and any hedging are negotiated in parallel.
- Regulatory and third-party checks. NSIA analysis, sanctions and anti-money laundering checks, and consents from landlords, counterparties or regulators where needed.
- Conditions precedent and signing. Corporate authorities, legal opinions, know-your-customer documents and the funds flow are agreed and delivered.
- Funding and perfection. The loan is drawn, charges are registered at Companies House within 21 days and notices are served on banks, insurers and counterparties.
- Ongoing monitoring. Compliance certificates, information undertakings, amendments, waivers and add-on facilities continue for the life of the loan.
Documents and evidence to assemble
A well-prepared borrower shortens the timetable and improves terms. Private credit lawyers London lenders instruct will typically ask for the following.
- Group structure chart, constitutional documents and board and shareholder approvals for each obligor.
- Audited accounts, management accounts, the financial model and the sponsor's business plan.
- Vendor due diligence reports and reliance letters, including tax structure memoranda.
- Existing debt, security and guarantee documents, with release and payoff letters for anything being refinanced.
- Material contracts with change-of-control or anti-assignment clauses, property leases and IP registrations.
- Bank account details for account control or notice arrangements, and insurance policies for loss payee endorsements.
- Lender treaty passport details or other evidence supporting any withholding tax exemption.
- Beneficial ownership information for know-your-customer, sanctions and NSIA screening.
For the security package itself, see our guide to taking security in the UK.
Risks and common mistakes
Paying interest gross before an HMRC direction is in place
A lender's treaty entitlement is not enough on its own. The borrower needs an HMRC direction before it pays an overseas lender gross or at a reduced rate, and a new lender joining shortly before an interest date can be missed. With HMRC's concession for early gross payments paused in 2026, a borrower that gets this wrong may have to account for the tax itself plus late-payment interest. Facility agreements should allocate this risk clearly, consider interest deferral until clearance and, where available, use the qualifying private placement route as a bridge.
Weak EBITDA and basket definitions
Uncapped add-backs, generous run-rate synergies and builder baskets can let a borrower raise more debt or pay dividends while performance falls. Lenders often discover the true headroom only when a covenant reset is requested. Borrowers face the opposite risk: definitions that are too tight trigger defaults over seasonal swings. Both sides should model the definitions against the business plan and downside cases before signing, not after.
Late or defective charge registration
A charge not registered within the 21-day period is void against an administrator, liquidator and creditors, although the debt itself survives. Extending the period requires a court order. Errors in the statement of particulars, a missing certified copy of the instrument or security granted by a newly acquired subsidiary after closing are common gaps. A post-closing perfection checklist with owners and dates prevents most problems.
Ignoring NSIA on enforcement
Taking share security is not usually notifiable, but enforcing it may be. If a lender or receiver would acquire control of a company operating in one of the sensitive sectors specified for mandatory notification, mandatory notification and clearance may be needed before control passes, and completing without approval makes the acquisition void. Lenders should screen targets at origination and build realistic timetables into enforcement planning, especially for defence, data infrastructure, energy and communications businesses.
Creditor-on-creditor risk and liability management
Non-pro rata transactions, such as moving assets out of the credit group or priming existing lenders with new super senior debt, have spread from the US market. In club and unitranche deals the risk is lower but not absent. Lenders should review sacred rights, pro rata sharing, unrestricted subsidiary designations and amendment thresholds. Borrowers and sponsors should understand which flexibility they genuinely need, since aggressive terms can affect pricing and appetite.
When a loan comes under stress
The private credit lawyers London lenders and sponsors bring in at this stage need both finance and insolvency judgement. Private credit restructurings tend to be consensual and quieter than syndicated ones, because a small number of lenders can negotiate directly with the sponsor. Typical tools are covenant resets, PIK switches, amend-and-extend deals, new money from the sponsor and, in harder cases, a debt-for-equity swap that hands ownership to the lenders.
Where consensus fails, the legal options include enforcing share security to sell the group or take control, appointing administrators, or using a Part 26A restructuring plan, which can bind dissenting classes through cross-class cram down if the statutory conditions are met. The Corporate Insolvency and Governance Act 2020 also introduced a standalone moratorium. The restriction on termination clauses in section 233B of the Insolvency Act 1986 contains carve-outs for financial contracts, so lenders' rights to accelerate are not generally frozen by it.
Agree the enforcement route before default, not after. A lender that has mapped the security package, NSIA exposure, pension scheme issues and key contract consents can move in days. One that has not may lose value while advisers work out what the security actually covers.
Our restructuring and insolvency team works with finance colleagues on these situations from the first missed covenant.
Cross-border angle: Bangladesh, the EU, the Gulf and Asia
Many transactions handled by private credit lawyers London funds use involve borrowers, guarantors or assets outside the UK. English law usually governs the facility agreement, but security over foreign assets must normally be taken under local law, with local counsel opinions on capacity and enforceability.
In cross-border private credit, the English law loan agreement is the easy part. The value sits in local security, exchange controls and whether a judgment or award can actually be enforced where the assets are.
Bangladesh
Bangladeshi companies borrowing from overseas lenders face foreign exchange controls and approval requirements administered by Bangladesh Bank and other authorities, which govern borrowing terms, security and repatriation of payments. Security over Bangladeshi land and shares requires local registration. TRW & Co's Dhaka office advises on these approvals alongside the London documentation; see our investing in Bangladesh practice and our note on the UK–Bangladesh double tax treaty, which is relevant to interest withholding in both directions.
The EU, the Gulf, Singapore and China
EU loan-originating funds must now comply with AIFMD II, which can affect co-lending with UK funds. Gulf sovereign and family office investors are active as limited partners and co-lenders, sometimes requiring Shari'a-compliant structures. Singapore and Hong Kong groups often use English law facilities with security in several Asian jurisdictions. Where enforcement against assets abroad is likely, London-seated arbitration may be preferred to court jurisdiction because of the reach of the New York Convention.
How TRW & Co helps
TRW & Co's London office is authorised and regulated by the Solicitors Regulation Authority. As private credit lawyers London clients can work with across several jurisdictions, we act for borrowers, sponsors, funds and co-investors.
Direct lending transactions
We negotiate and draft unitranche, senior and holdco facilities, agreements among lenders and intercreditor terms. We focus on the definitions and baskets that drive real flexibility and risk.
Security and perfection
We design guarantor coverage and security packages, manage Companies House registration and run post-closing perfection so nothing falls through the 21-day window.
Fund and NAV finance
We advise on subscription lines, NAV facilities and fund-level borrowing, checking limited partnership agreements, side letters and investor consents.
Tax and regulatory coordination
We work with tax advisers on withholding, treaty clearance and QAHC structures, and on NSIA, sanctions and FCA perimeter questions affecting lenders and managers.
Amendments, waivers and distress
We negotiate covenant resets, amend-and-extend deals and consensual restructurings, and plan enforcement where needed, working with insolvency colleagues.
Bangladesh and cross-border deals
Our Dhaka and London teams coordinate English law documents with Bangladeshi approvals, local security and enforcement planning.
See also our leveraged finance and investment funds practices, or browse all our practices.
Checklist for decision-makers
- Compare at least two structures (for example, bank club versus unitranche) on all-in cost, flexibility and call protection, not just margin.
- Model the EBITDA definition, add-back caps and baskets against your downside case.
- Confirm the withholding tax route for every lender and build HMRC clearance into the funding timetable.
- Agree transfer restrictions and a disqualified lender list that protect you without blocking legitimate liquidity.
- Map NSIA exposure for every entity whose shares are charged.
- Assign owners and deadlines for charge registration and post-closing deliverables.
- For funds, check that valuation, conflicts and co-investment policies meet the FCA's stated expectations.
- Plan for stress early: know your enforcement and restructuring options before the first covenant breach.
To discuss a transaction with our private credit lawyers London team, contact us, email info@trw.co or call +880 1779 127165. Our London office is at Holborn Gate, 330 High Holborn, London WC1V 7QH.
Frequently asked questions
01Is direct lending to UK companies a regulated activity?
Generally not. Making commercial loans to companies is not a regulated activity under the Financial Services and Markets Act 2000, so a credit fund lending to a UK trading company does not need an FCA lending permission for that reason alone. Lending to individuals is different and may be consumer credit or a regulated mortgage contract. The fund manager itself will usually need FCA authorisation as an alternative investment fund manager, and marketing the fund to investors is regulated separately.
02What is a unitranche loan and how is it different from senior and mezzanine debt?
A unitranche is a single loan, usually from one fund or a small club, that replaces separate senior and junior tranches with one blended price and one set of documents. It is simpler and faster for the borrower. Lenders can still split the economics among themselves through an agreement among lenders, creating first-out and last-out positions that the borrower may not see. A bank often provides a super senior revolving facility alongside, with priority on enforcement proceeds under an intercreditor agreement.
03Why does withholding tax matter so much in private credit?
Many direct lenders are funds or vehicles outside the UK. A UK borrower paying yearly interest to them must generally deduct basic rate income tax unless an exemption applies or HMRC has issued a direction under a double tax treaty. Paying gross too early exposes the borrower to the tax plus interest. Since HMRC paused its concession for early gross payments in 2026, getting directions, qualifying private placement certificates or listed debt routes in place before interest dates is essential.
04Can a lender enforce share security without government approval?
Often yes, but not always. Under the National Security and Investment Act 2021, granting share security without transferring title is not a notifiable acquisition. On enforcement, if the lender or a receiver acquires voting control of a company carrying on activities in one of the specified sensitive sectors, mandatory notification and clearance may be required before control passes. Lenders should screen this at origination so enforcement plans include realistic clearance timetables.
05How long does a private credit financing take?
It depends on diligence and complexity. A straightforward refinancing with an existing lender can close within a few weeks, while an acquisition financing with new diligence, a multi-jurisdiction security package and treaty clearances can take longer. The critical path is usually the structure paper, tax analysis and conditions precedent rather than the facility agreement itself. Starting legal and tax work at term sheet stage avoids most delays.
06What happens if our business breaches its leverage covenant?
A breach is usually an event of default, but lenders rarely accelerate immediately. Common responses are a waiver for a fee, a covenant reset, an equity cure if the documents allow one, or a wider amend-and-extend with additional sponsor support. Engage early: lenders are more flexible before a breach than after it. If consensus is not possible, options include enforcement of share security, administration or a Part 26A restructuring plan.
07Can a Bangladeshi company borrow from a London private credit fund?
It is possible, but Bangladesh's foreign exchange framework requires approvals for many foreign borrowings, and conditions can cover pricing, tenor and security. Security over Bangladeshi assets must be taken and registered under local law, and the withholding tax position in both countries needs analysis. Often a UK or offshore holding company borrows instead. TRW & Co's London and Dhaka offices work on both sides of these transactions.
Sources and official materials
- FCA: Private market valuation practices — FCA multi-firm review findings and expectations for managers
- Bank of England: System-wide exploratory scenario — Private markets SWES launched December 2025
- Alternative Investment Fund Managers Regulations 2013 — Current UK regime for fund managers
- Companies Act 2006, section 859A — Registration of charges within 21 days
- Income Tax Act 2007, section 888A — Qualifying private placement withholding tax exemption
- HMRC: Double Taxation Treaty Passport scheme — Treaty clearance process for overseas corporate lenders
- NSI Act: guidance on acquisitions — Treatment of share security, insolvency and enforcement
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.