A non-recourse structured facility against listed shares is not opened like a brokerage account. It is documented transaction by transaction. At Silo the documentation is four instruments: a Facility Agreement, a Collateral Management Agreement, a Promissory Note and a Closing Statement. Each has one job. Each is signed at a fixed point in the sequence.
This piece is for the shareholder, their counsel and, where the shareholder is a director or substantial holder, the company secretary. It sets out what each document does, who signs it, what to look for, and what does not belong in it. It does not quote terms. Terms depend on the specific shares and are set in the documents themselves.
1. Facility Agreement
What it does. The Facility Agreement sets the terms of the facility. It is the primary contract, and any further tranches follow it.
Who signs. The borrower and the Silo lending entity. It is signed first, together with the Promissory Note, so the terms are fixed before anything moves.
What to look for.
- The name of the lending entity. It should be the entity whose capital funds the facility, not an arranger or a “partner”.
- The non-recourse provision. Read the clause itself, not a summary. Silo’s facilities are documented without personal or corporate liability beyond the pledged collateral.
- Collateral events and their consequences: price thresholds, trading suspensions, corporate actions. They should be defined in advance and consistent with the non-recourse clause.
- Maturity: repayment, refinancing or return of the shares, and whether early repayment is permitted.
- Tranches. If the facility is released in more than one tranche, the conditions for each should be in this document.
2. Promissory Note
What it does. The Promissory Note evidences the borrower’s obligation. It should match the Facility Agreement exactly.
Who signs. The borrower, in favor of the Silo lending entity. It is signed at the same time as the Facility Agreement, before any account is opened or any shares move.
What to look for. Consistency. The amount, the parties and the maturity in the note should be the same as in the Facility Agreement. The note should not reintroduce, by its own wording, a personal obligation that the Facility Agreement excludes. Counsel should read the two documents side by side.
3. Collateral Management Agreement
What it does. The Collateral Management Agreement governs how the pledged shares are held and controlled through the executing broker-dealer. It is the document that turns a block of shares in an account into collateral, with defined parameters.
Who signs. All three parties: the borrower, Silo and the designated broker-dealer. It is executed after the shares are deposited, and the broker-dealer then activates the collateral parameters.
By that point, two things have already happened. The borrower has opened an account in their own name at the designated broker-dealer. Silo’s capital for the facility has been deposited into that account, where the borrower can see it before any shares move. The operational steps are carried out by licensed securities firms and broker-dealers, not by Silo itself.
What to look for.
- The account: whose name it is in, at which broker-dealer, and what kind of account it is.
- Control: who can give instructions on the account during the term, and in what circumstances.
- Use of the shares: whether they can be sold, lent or rehypothecated during the term, and on what conditions. At Silo, these conditions are defined in the agreements for each transaction. Read them before signing.
- Dividends and voting: who receives them and who exercises them. At Silo, this is defined in the agreements for each transaction.
- Release of the collateral at maturity or on repayment.
4. Closing Statement
What it does. The Closing Statement confirms the economics of the transaction before any funds are released. The shareholder does not discover the terms after the fact.
Who signs. Silo issues it and the borrower signs it. On the borrower’s signature, the release of funds is instructed immediately. Any further tranches follow the Facility Agreement.
What to look for. The figures should reconcile to the Facility Agreement. Nothing should appear in the Closing Statement for the first time, whether a fee, a deduction or a condition, that the Facility Agreement does not already provide for. If something does, stop and ask before signing.
Why the order matters
The sequence is part of the protection. The terms are signed first. The capital is in the borrower’s own account before the shares are deposited. The collateral is activated only once both are in place. Funds are released only on a signed confirmation of the economics. A sequence that runs the other way, with shares transferred first and funding found afterwards, is the failure pattern the word “prefunded” is meant to rule out. See what “prefunded” means and how to verify it.
What is not in these documents
- No obligation to sell shares to fund the facility. Silo’s execution is prefunded; no securities selling is required.
- No liability beyond the collateral. The documents are non-recourse. Any clause that suggests otherwise, such as a personal guarantee, a cross-default to other assets or a top-up obligation, should be raised with counsel at once.
- No third-party authority. No outside party may bind or commit Silo. A document, or a person, claiming to commit Silo on someone else’s signature is not Silo’s.
- No advice. Silo is not a broker, a placement agent or an investment adviser. The documents set out a transaction. They do not recommend it.
Points to raise with your own counsel
Some questions depend on where the shares are listed and on the reader’s own position: governing law and jurisdiction of each document, any disclosure a pledge may trigger for directors or substantial shareholders, and any restrictions on the shares themselves. These are questions for the reader’s counsel and company secretary, not for the lender. Documentation at Silo is prepared by in-house counsel, with outside law firms retained in the relevant jurisdictions. Full drafts of all four documents are provided to the borrower’s counsel for review before signing.
For how these documents fit the overall structure, see structured liquidity facilities and securities-backed credit.
Frequently asked questions
Why four documents rather than one loan agreement?
Each instrument has a separate job: terms, the obligation, control of the collateral, and confirmation of the economics. Separating them lets each be signed at the point in the sequence where it belongs.
Which document makes the facility non-recourse?
The non-recourse provision sits in the facility documentation. Read the clause itself, and check that the Promissory Note and the Collateral Management Agreement are consistent with it.
When are funds released?
On the borrower’s signature of the Closing Statement, release of funds is instructed immediately. Any further tranches follow the Facility Agreement.
Who holds the shares during the term?
They are held in an account in the borrower’s own name at a licensed broker-dealer, governed by the Collateral Management Agreement.
Will my counsel see the documents before I sign?
Yes. Full drafts of all four documents are provided to the borrower’s counsel for review before signing.
This material is provided for informational purposes only. Nothing herein constitutes investment, legal, tax, securities, accounting or regulatory advice, an offer to lend or provide financing, a solicitation, a recommendation, or a commitment to enter into any transaction. Access may be restricted by jurisdiction or residency. Any potential facility remains subject to Silo’s review, diligence, approval, jurisdictional analysis, compliance review and definitive documentation. Readers should consult their own professional advisers.