Loan Agreements regulate the making of a term loan. The Simply Docs Loan Agreements cover the necessary legal and practical commercial considerations relevant to the lending of small to medium sized amounts for specified periods of time.
The Loan Agreements folder contains long and short form versions of the Loan Agreement. The Loan Agreement – Long Form contains a number of provisions including clauses on interest and repayments, and detailed provision for representations and warranties, covenants and undertakings. The Loan Agreement – Short Form does not include the same level of detail or protection, and is suitable for less complex transactions.
We also offer two Personal Loan Agreements – one for loans carrying interest, and the other where no interest is payable.
Finally, there is a Deed of Assignment of Loan, and a Deed of Novation of Loan, to cover situations where the lender is transferring the loan to a third party.
Secured Lending – the pitfalls
Simply-docs offers a limited range of secured loan agreements, including a Debenture, which is a fixed and floating charge over the assets of a borrower, and a Director’s loan agreement, which is secured on the director’s property.
The legal issues surrounding the taking of security are complex, and there are various legal forms that can be used, for example, a chattel mortgage (a mortgage over tangible and moveable property, such as plant and machinery or vehicles), fixed and floating charge, pledge, lien and assignment by way of security. Security over shares is different again, and can be achieved by way of a legal mortgage, an equitable mortgage or an equitable charge.
There are a number of issues that need to be addressed, in order for a lender to enforce its security, such as :-
• The loan agreement must contain a right of enforcement (including detailed provisions regarding when and how a lender can enforce its security). Ideally the enforcement provisions should be tailored to reflect the nature of the secured asset.
• The lender must formally demand repayment
• There must be some agreement as to how the lender takes possession of the secured assets (or in some cases, ownership must pass in order for the security to be valid – for example, in the case of a legal mortgage of shares).
• The loan agreement must contain a power of sale in relation to the secured assets.
• The security may be invalid unless registered at Companies House and in the borrower’s company registers.
• If an individual or partnership provides security over chattels, the requirements of the rather archane Bills of Sale Act (1878) must be complied with.
In view of the complexity of taking security, you are advised to take legal advice to ensure that the proposed security is enforceable in the event of default in repayment.