Directors' Loan Agreements
Directors can be involved in loans with their company in two main ways:
- the company makes a loan to a director (or a person connected with a director); or
- a director makes a loan to the company.
There are specific legal requirements where a company lends to a director, particularly once the total value of the loans exceeds £10,000. Loans from a director to the company are closer to a standard commercial lending arrangement, but still raise legal and governance issues.
This Directors’ Loan Agreements section brings together:
- guidance on the legal framework for loans involving directors;
- secured and unsecured loan agreements where the company lends to a director or connected person (for use only where the aggregate loan value is below £10,000 so that shareholder approval is not required);
- documents for loans secured over joint property and related Land Registry applications;
- shareholder approval documents (resolution and memorandum) for loans to directors and guarantees requiring approval under section 197 Companies Act 2006; and
- long-form and basic-form loan agreements where a director lends to the company.
Each document in the Directors’ Loan Agreements section is compliant with the Companies Act 2006.
When To Use These Templates
Use these templates when you are:
- documenting a loan from the company to a director or a person connected with a director, where the aggregate value is below £10,000;
- putting in place security, including over joint property, in connection with a director’s loan;
- seeking shareholder approval for the company to make a loan to a director or to act as a guarantor for a director under section 197 CA 2006;
- preparing the memorandum required under section 197(4) CA 2006 for members to consider before approving the transaction;
- documenting a loan from a director to the company on either a basic or detailed commercial basis;
- understanding the legal issues that arise whenever directors are involved in lending arrangements with the company.
📁 Templates In This Section
Guidance
Loans to directors and connected persons (company as lender)
- Director’s Loan Agreement - Unsecured
- Director’s Loan Agreement - Secured
- Director’s Loan – Secured over Joint Property
- Guidance on Land Registry Applications relating to a Director’s Secured Loan
Shareholder approval and memorandum (s.197 CA 2006)
- Shareholders’ Ordinary Resolution for Approving Loan to a Director or Acting as Guarantor for a Director
- Memorandum of Terms of Loan to Director (197(4) of the Companies Act 2006)
Loans from directors to the company (company as borrower)
- Directors’ Long Form Loan Agreement – Loan to Company
- Directors’ Loan Agreement Basic Form – Loan to Company
🔀 Document Toolkit: Typical Sequence (may vary)
- Identify whether the company is lending to a director (or connected person) or the director is lending to the company, and whether any approval is needed.
- For loans to directors below £10,000 in aggregate, select the appropriate secured or unsecured Director’s Loan Agreement and, if relevant, the joint property and Land Registry guidance.
- Where shareholder approval is required under section 197 CA 2006, prepare the Memorandum of Terms of Loan to Director and seek approval using the Shareholders’ Ordinary Resolution for Approving Loan to a Director or Acting as Guarantor for a Director.
- For loans from a director to the company, choose either the long-form or basic loan agreement and agree the commercial terms.
- Keep signed agreements, resolutions, memoranda and any Land Registry or Companies House filings with the company’s statutory and financial records.
- Guidance Notes: Loans Involving Directors
- Director’s Loan Agreement - Unsecured
- Director’s Loan Agreement - Secured
- Director’s Loan – Secured over Joint Property
- Guidance on Land Registry Applications relating to a Director’s Secured Loan
- Shareholders’ Ordinary Resolution for Approving Loan to a Director or Acting as Guarantor for a Director
- Memorandum of Terms of Loan to Director (197(4) of the Companies Act 2006)
- Directors’ Long Form Loan Agreement – Loan to Company
- Directors’ Loan Agreement Basic Form – Loan to Company
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Frequently Asked Questions
Can the company lend money to a director without asking shareholders?
Only within the exceptions. The main one lets a company lend where the value of the loan, together with other relevant transactions, does not exceed £10,000 under section 207 of the Companies Act 2006. Otherwise section 197 requires an ordinary resolution of the members first. The unsecured and secured Director's Loan Agreement templates here are designed for the below £10,000 case where no approval is needed.
What do members need to see before approving a larger loan?
A memorandum under section 197(3) and (4) setting out the nature of the transaction, the amount and purpose of the loan and the extent of the company's liability. Send it with a written resolution, or make it available at the registered office for 15 days ending with the meeting date and at the meeting itself. Simply-Docs provides the Memorandum of Terms of Loan to Director (197(4)) and the matching ordinary resolution.
What if a loan was made without the required approval?
The transaction is voidable at the instance of the company under section 213, and the director concerned and any director who authorised it can be liable to account for gains and indemnify the company for losses. The members can affirm the transaction within a reasonable period under section 214, after which it can no longer be avoided. Take advice before deciding whether to unwind or affirm.
Do the same rules apply when a director lends money to the company?
No. Section 197 controls loans by the company to directors, not loans the other way, so no shareholder approval is needed when a director lends to the company. It is still a transaction in which the director is interested, so it should be declared under section 177 and approved by the board. Use the Directors' Long Form or Basic Form Loan Agreement - Loan to Company to document the terms.
Does lending to a director's spouse or family company need approval too?
For most private companies, no: the section 197 approval requirement covers loans to directors of the company or its holding company. Loans to connected persons such as family members or their companies need member approval only where the company is a public company or associated with one, under section 200. A substantial non-cash transfer to a connected person is caught separately by section 190.
Can we take security over the director's home for the loan?
Yes. The Director's Loan Agreement - Secured and Director's Loan - Secured over Joint Property templates cover this, with guidance on the related Land Registry applications. Where the property is jointly owned the co-owner must join in the charge, and independent legal advice for them is strongly advisable to protect the security against undue influence challenges. These templates are for aggregate lending below £10,000 where shareholder approval is not required.