Covenants
Information undertakings
Information undertakings are the reporting obligations in a facility agreement. They are the least negotiated covenants and the ones you live with every month, and late delivery says something about a business that its numbers may not.
Also called reporting covenants · compliance certificate · information covenants · lender reporting requirements
The obligations run on three clocks. Most borrowers plan for the quarterly one and are caught by the monthly.
| Deliverable | Frequency |
|---|---|
| Monthly management accounts | Every month, forever |
| Quarterly compliance certificate | 30–55 on the scale |
| Annual statutory accounts | 60–82 on the scale |
| Annual budget or forecast | 78–98 on the scale |
The reporting cadence in a typical facility agreement. The 30 to 60 day compliance-certificate window is published; the monthly and annual items are market practice and vary by agreement, so no deadline is asserted for them.
What they are
The obligations in a facility agreement to give the lender information: what, in what form, and by when.
They sit alongside the financial covenants and are usually drafted as undertakings rather than as tests. A financial covenant asks whether the business met a ratio. An information undertaking asks whether you told the lender, on time, in the agreed format.
They are the least negotiated part of most agreements and the part a borrower lives with most often. A leverage covenant is tested four times a year; a monthly reporting obligation arrives twelve times, every year, for the life of the facility.
The reporting calendar
Three clocks, running at different speeds.
Monthly management accounts are the most demanding, because they require a finance function that closes reliably every month rather than when it has time. Many businesses that produce good annual accounts have a monthly process that is approximate, and a facility turns that from an internal preference into an obligation.
The quarterly compliance certificate is the formal covenant document, due within a window commonly of thirty to sixty days after the quarter end.
Annual statutory accounts and a budget or forecast for the coming year complete the calendar. Agreements often add event-driven obligations too: notification of a default, of litigation above a threshold, of the loss of a material customer, or of a change in the group structure.
Not everything you send is read with the same attention. Knowing which is which tells you where to spend the effort.
| Deliverable | How closely read |
|---|---|
| Statutory accounts | 4–26 on the scale |
| The annual budget | 28–50 on the scale |
| Monthly management accounts | 50–74 on the scale |
| The compliance certificate | Every line |
How closely each deliverable is typically read by a lender. Illustrative of practice rather than measured data; a lender in a workout reads everything closely.
What a compliance certificate contains
More than a confirmation. It is a working document and its contents are prescribed.
A compliance certificate is a signed statement, typically from a director or the finance director, that sets out each covenant, its required level, the actual figure and the calculation behind it, and confirms compliance or reports a breach.
The calculation is the part that matters and the part borrowers most often treat as a formality. Showing the working means showing which add-backs were taken, how EBITDA was derived, what was included in net debt and how the trailing twelve months were assembled. A lender reading a bare number has to ask; a lender reading the derivation does not.
It also means an error is yours. A certificate signed by a director stating a covenant position is a representation, and getting the calculation wrong in your own favour is a considerably worse problem than reporting a breach accurately.
The timing point that matters
The covenant is tested on the test date, not on the day you file the certificate. This is the single most useful thing on this page.
The moment the quarter's management numbers are in hand, well before the certificate is due, you already know whether you passed and by how much. That window between the test date and the filing is not a grace period.
So the certificate deadline is a reporting deadline, not a deciding deadline. The position was fixed on the last day of the quarter and nothing done afterwards changes it.
What the window is for is deciding how to handle what you already know. A business that discovers a breach three weeks before the certificate is due has three weeks to prepare an explanation, a remedy and a conversation. One that discovers it when the certificate is being signed has none, and arrives at the lender with a breach and no plan.
What a lender reads
The certificate line by line, the monthly numbers for trend, and the statutory accounts barely at all.
Statutory accounts arrive months after the period they describe and largely confirm what the lender already knows from the management information. They are filed rather than studied.
The budget is read once at the start of the year, and then it does real work as the reference the actuals are compared against. A budget that was optimistic is a problem all year, because every month is measured against it.
Monthly management accounts are read for direction rather than detail: is the trend holding, is working capital behaving, has anything moved sharply. A lender is not auditing them.
The compliance certificate is read closely, because it is the document that states the covenant position and shows the derivation. That is where attention should go.
Late reporting is read as information in itself, and the reading gets worse the longer it goes on.
| Pattern | How it reads |
|---|---|
| One late month, flagged early | Fine |
| Persistently late by a few days | 26–50 on the scale |
| Late in a weak quarter | 52–76 on the scale |
| Silence past the deadline | Assumed to be bad |
How a lender reads late or missing reporting, by pattern. Illustrative of practice; no statistic on late reporting exists in our canon and none is claimed.
What late delivery signals
Information about the business, which is why lenders care more about lateness than the documents themselves would suggest.
One late month, flagged in advance with a reason, is barely noticed. Persistent lateness by a few days suggests a finance function without capacity, which is a question about how well the business is run rather than about the report.
A certificate that arrives late in a quarter where the numbers were weak is read as reluctance, fairly or not, and it costs credibility at the exact moment credibility is worth most.
Silence is the worst of them. A deadline that passes with no contact leaves a lender to assume the news is bad, and that assumption hardens quickly. A short note saying the numbers will be a week late and why costs nothing and prevents all of it.
What the process has to carry
Once, properly, at the start, so it runs without heroics for five years.
The certificate has to pull from the same source as the management accounts, with the covenant definitions applied exactly as the agreement words them rather than as a finance team would naturally calculate them. Those two are frequently different, and the gap surfaces at the worst moment.
Every deadline needs a date against it, including the event-driven ones, which are the easiest to miss because they have no fixed date to sit in a calendar.
It needs one owner. Reporting that depends on whoever is available is reporting that will be late in the month someone is on leave.
And model the covenants forward monthly rather than testing them quarterly. If the ratio is going to fail in two quarters, that is visible now, and the value of knowing early is the whole reason to run the calculation more often than the agreement requires.
What to negotiate
The frequency, the format and the event triggers, and it is worth raising because almost nobody does.
On frequency, a business that closes monthly reliably should agree to monthly reporting. One whose process is quarterly should say so and negotiate accordingly rather than agreeing to an obligation it will breach in month two. Lenders are generally reasonable about this at signing and much less so afterwards.
On format, agree that the certificate follows your own management reporting where possible. A bespoke format that requires a separate assembly exercise every quarter is a recurring cost with no benefit to either side.
On event triggers, check the thresholds. A requirement to notify litigation above a low figure, or the loss of any customer above a small percentage, generates a stream of notifications that helps nobody and creates a technical breach every time one is missed.
None of this is contentious. It is simply left as drafted when nobody asks.
Common questions
What are information undertakings?
The obligations in a facility agreement to give the lender information: what, in what form and by when. They sit alongside the financial covenants, and they are the least negotiated part of most agreements and the part you live with most often.
What do I have to report, and how often?
Typically monthly management accounts, a quarterly compliance certificate, annual statutory accounts and an annual budget, plus event-driven notifications such as a default, material litigation or the loss of a key customer. The monthly obligation is the one businesses underestimate.
When is the compliance certificate due?
Within a window commonly of thirty to sixty days after the quarter end. It is a signed statement, typically from a director or the finance director, setting out each covenant, its required level, the actual figure and the calculation behind it, and confirming compliance or reporting a breach.
Does filing late give me more time to fix a covenant?
No, and this is the most useful thing to understand. The covenant is tested on the test date, not on the day you file. The position was fixed on the last day of the quarter and the filing window is not a grace period; it is time to decide how to handle what you already know.
How much detail should the certificate show?
The calculation, not just the answer. It should show which add-backs were taken, how EBITDA was derived, what sits in net debt and how the trailing twelve months were assembled. A lender reading a bare number has to ask; one reading the derivation does not. And an error in your own favour is a worse problem than an accurate breach.
What happens if reporting is late?
It depends on the pattern rather than the instance. One late month flagged in advance is barely noticed. Persistent lateness reads as a finance function without capacity. Late delivery in a weak quarter reads as reluctance. Silence past a deadline is worst, because the lender assumes the news is bad.
Is there a standard reporting deadline?
Only the compliance-certificate window of commonly thirty to sixty days is a published convention. Monthly and annual deadlines vary by agreement and we quote no standard for them, so read your own document rather than assuming a market norm.
What should I negotiate on reporting?
Frequency matched to what your finance function produces, a certificate format that follows your own management reporting rather than requiring a separate exercise, and sensible thresholds on event-driven notifications. Lenders are reasonable about these at signing and much less so afterwards.
The full treatment sits in the guide: loan covenants explained.
This page explains a term as it is used in the UK lower-mid-market. It is general information, not advice on any particular facility. Terms vary between lenders and between deals, and the drafting in your own agreement governs.