Business, Legal & Accounting Glossary
A keepwell agreement is a contract between a parent company and one of its subsidiaries which guarantees that the parent company will provide all necessary financing to the subsidiary for a pre-determined period of time. The idea behind a keepwell agreement is to make the subsidiary company appear more creditworthy in the eyes of banks and other lenders. Without a keepwell agreement a small subsidiary might have trouble securing additional financing. Since the keepwell agreement acts as a financial guarantee, obligating the parent company to provide consistent funding, banks and other financial institutions feel more confident making loans with a keepwell agreement in place. Likewise, due to the financial obligation placed on the parent company by a keepwell agreement, the subsidiary company may enjoy a better credit rating than would be possible without a signed keepwell agreement.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Keepwell Agreement are sourced/syndicated and enhanced from:
This glossary post was last updated: 9th February, 2020