What is the difference between information undertakings and financial covenants?

A financial covenant sets a measurable level, such as leverage or interest cover, that the business must meet on a test date. An information undertaking requires the business to supply reports and news. The first tests how the business is doing; the second is how the lender finds out. The two connect at the compliance certificate, which reports the covenant result and is itself one of the items the information undertakings require.

How soon after year end does a bank need the accounts?

Whatever the facility agreement says, and it varies with the size of the borrower and the level of assurance. Lenders generally want annual accounts well ahead of any statutory filing date, and management accounts within weeks of the period end. A borrower who is unsure can look for the clause headed financial statements or information undertakings, and check whether days are counted from the period end or from another date.

What happens if a company misses an information undertaking?

It is a breach of the agreement, and if it is not put right within any remedy period it can become an event of default. Lenders seldom enforce on a late report alone. More often they call, ask why, and may ask for more frequent reporting. Where the delay is explained before the deadline the reaction is usually milder. A lender that cannot test a covenant because the accounts are absent may run its own estimate.

Does a business have to tell its bank about losing a major customer?

It depends on the agreement. Some name the event or set a threshold; others require notice of anything likely to have a material adverse effect, which a large enough loss would be. Even where no clause clearly applies, a bank that later finds it was kept in the dark is likely to read the file differently, and new drawings may repeat statements about the borrower's position. Telling the bank early usually costs less than being found out.

// WORKED EXAMPLEHOW THE CLAUSE WORKS

Information Undertakings: What a Borrower Must Report

What the bank is told, by when, and who has to say so.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-09 · 6 MIN READ

// THE SHORT ANSWER

Between one annual review and the next, a lender can see a business only through what the facility agreement obliges it to send. Information undertakings are that obligation, written as promises: which reports, at what level of assurance, how soon after the period ends, and which events must be reported as they happen. They sit beside the financial covenants and feed them, because a ratio cannot be tested without the accounts behind it. A lender reads the timing as well as the content: whether each item came when promised, and whether bad news arrived from the borrower first.

BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// MAKE THE CALL

Issue 04 — Highview Industries. Same request as Issue 01 on the surface. A completely different file underneath. Your call first, then the senior banker's.

Read the file →

PART OF Loan Covenants, Explained

// 01 — WHY A LENDER WRITES DOWN WHAT IT WILL BE TOLD

A credit decision is made on a snapshot, and the loan then runs for years. Once the money is out, the lender has no general right to look inside the company, and a private business publishes little that would help. The clause replaces that with a contract: the borrower agrees in advance what it will hand over, so the lender does not have to ask, and has a contractual answer if it is refused.

The lender also answers to its supervisors. The Basel Committee's 2025 principles on credit risk treat obtaining current financial information as part of credit administration, and expect a monitoring system that lets a bank understand a borrower's current condition. A bank cannot do that from accounts filed long after the year has ended. In the UK, for example, a private company has nine months from its year end to file at Companies House, and a lender will usually want its copy sooner.

// 02 — WHAT THE CLAUSE USUALLY ASKS FOR

Item When Form

Annual accounts set days after year end audited, reviewed or compiled

Management accounts monthly or quarterly unaudited, with comparatives

Compliance certificate each test date signed, with the calculation

Budget around year start board-approved forecast

Notice of events promptly default, litigation, major losses

On request as asked customer checks, other reasonable requests

Each line is negotiated, and the agreement sets its own days. The annual accounts line names an accounting basis and a level of assurance, and a lender has to read what that basis gives it. A mid-market group may report under a reduced-disclosure tier in New Zealand or Australia, or under FRS 102 in the UK, so the notes a lender is used to from a listed company's IFRS accounts may be absent.

The notice line is the one a finance team diaries least, because it has no date. Words like "promptly" and thresholds like "reasonably likely to have a material adverse effect" leave judgment to the borrower. A lender that wants to hear about a specific event, such as the loss of a major customer or a tax dispute, is better served by naming it.

// 03 — THE EXAMPLE

An events equipment hire business, constructed for this page like every figure in it, earns EBITDA of US$7.0m on revenue of US$24m and has net debt of US$17.5m. One venue contract brings in US$6.0m of revenue and US$2.2m of EBITDA. Its covenant is net debt to EBITDA of no more than 3.25 times, tested quarterly on the last twelve months, a level that belongs to this example. Its agreement requires prompt notice of the loss of any customer above 10% of revenue.

In April the venue gives notice that the contract will end on 30 June. Nobody tells the bank. In May the business draws US$1.5m on its revolving line to buy lighting rigs. The bank learns of the lost contract in July, from a sentence in the June commentary.

Before: 17.5 ÷ 7.0 = 2.50×

Net debt with rigs: 17.5 + 1.5 = 19.0

Earnings without it: 7.0 − 2.2 = 4.8

Forward leverage: 19.0 ÷ 4.8 = 3.96×

What the covenant would show, the contract rolling out evenly:

30 Sept LTM 7.0 − 0.55 = 6.45 19.0 ÷ 6.45 = 2.95×

31 Dec LTM 7.0 − 1.10 = 5.90 19.0 ÷ 5.90 = 3.22×

31 March LTM 7.0 − 1.65 = 5.35 19.0 ÷ 5.35 = 3.55× first breach

That is the point of a notice clause. The twelve-month test absorbs the loss a quarter at a time, so the covenant would not have failed until March, eleven months after the customer gave notice. The notice clause was meant to close that gap. Here it failed for three months, in which the bank lent a further US$1.5m without knowing what it would be lending against.

The breach itself cost little. This bank accepted the late notice as the remedy and did not call a default, though the May drawing had been made while the breach was running. What changed was the reading: the file went on closer watch, the bank asked for a thirteen-week cash flow, and accounts moved to a monthly timetable with a call attached. The conversation the business needed, about replacing the contract and resetting the debt, began three months late.

// 04 — HOW THEY DIFFER FROM COVENANTS BESIDE THEM

A financial covenant sets a level and is either met or not. An information undertaking sets no level: it can be perfectly complied with while the news delivered is terrible. General undertakings govern what the business may do, such as borrowing elsewhere or giving security. Representations are statements of fact at a moment, and often repeat. Information undertakings are what let a lender check the others.

They also differ from the routine monthly pack, though in practice the two overlap. The pack is what a well-run borrower sends; the undertaking is the part of it the bank can enforce. A borrower may send far more than it has promised, and a good relationship often rests on that, but what it has promised is the only part that carries a contractual consequence if it stops.

DEFINED IN ONE PARAGRAPH → · THE MONTHLY PACK → · AUDITED, REVIEWED OR COMPILED →

// 05 — WHERE IT DECIDES A FILE

At signing, the argument should be about what the business can actually produce. A deadline a small finance team can meet only in a good month will be breached in a bad one, which is when it matters. An audit requirement carries a cost that a review might avoid. A borrower that agrees to everything in the first draft has often agreed to something it cannot do. A lender, for its part, can ask for less and use it better: a short list of reports that will be read beats a long list that will be filed.

After signing, the clause works as a calendar. A lender logs when each item was due and when it arrived, and a cure period changes the legal result without changing that record. A new finance chief, a change of accountant or a move to a new system are ordinary reasons for a report to slip, and a borrower who explains the delay before the due date keeps the bank's reading of it where it belongs.

THE COMPLIANCE CERTIFICATE → · HOW BANKS MANAGE CREDIT RISK →

// SOURCES

The documents the statements on this page rest on. Each was opened and checked when cited.

Basel Committee on Banking Supervision, Principles for the management of credit risk, April 2025 — Principle 8, paragraph 37; Principle 9, paragraph 43 — Treats obtaining current financial information as part of credit administration and expects monitoring that keeps a bank aware of a borrower's current financial condition — section 01.
GOV.UK, Prepare and file annual accounts for a limited company — Gives the deadline of nine months after the financial year end for private limited companies — section 01.

// QUESTIONS PEOPLE ASK

What is the difference between information undertakings and financial covenants?: A financial covenant sets a measurable level, such as leverage or interest cover, that the business must meet on a test date. An information undertaking requires the business to supply reports and news. The first tests how the business is doing; the second is how the lender finds out. The two connect at the compliance certificate, which reports the covenant result and is itself one of the items the information undertakings require.
How soon after year end does a bank need the accounts?: Whatever the facility agreement says, and it varies with the size of the borrower and the level of assurance. Lenders generally want annual accounts well ahead of any statutory filing date, and management accounts within weeks of the period end. A borrower who is unsure can look for the clause headed financial statements or information undertakings, and check whether days are counted from the period end or from another date.
What happens if a company misses an information undertaking?: It is a breach of the agreement, and if it is not put right within any remedy period it can become an event of default. Lenders seldom enforce on a late report alone. More often they call, ask why, and may ask for more frequent reporting. Where the delay is explained before the deadline the reaction is usually milder. A lender that cannot test a covenant because the accounts are absent may run its own estimate.
Does a business have to tell its bank about losing a major customer?: It depends on the agreement. Some name the event or set a threshold; others require notice of anything likely to have a material adverse effect, which a large enough loss would be. Even where no clause clearly applies, a bank that later finds it was kept in the dark is likely to read the file differently, and new drawings may repeat statements about the borrower's position. Telling the bank early usually costs less than being found out.

// NEXT TO IT

// ON WHOSE DESK

The seats that read this term in an ordinary week. Each page says what the seat is for, who arrives in it, and the shape of the round it runs.

Credit sanctionerHolds delegated authority and signs — or declines — the lending the front line brings.
Legal counselAdvises the bank on what it can do, drafts and negotiates what it signs, and manages what goes wrong.
Portfolio managerOwns the credit on a book after the money is out — reviews, covenants, ratings and early warning.

THE IN-TRAY · ONE MINUTE

Make the call on one file.

A short file on the ground this page covers. Every option opens with how far it sits from a senior banker’s read.

THE CALL · THE LOAN · PROTECTION

A company with a US$25m senior secured bank loan and US$20m of unsecured notes fails. After the costs of the process, its assets realise US$30m.

Who gets what?

7 MORE ON THE LOAN · PROTECTION →WHERE DO YOU READ FROM? THE PLACEMENT →

THE READING ROOMIN ONE PARAGRAPHInformation undertakings What are information undertakings in a facility agreement?