Directors' Loan Agreements

Directors can be involved in loans with companies either because a company makes a loan to one of its directors or because a director may make a loan available to the company that he or she is a director of.

Loans to Directors

Companies may make loans to their directors without seeking approval from their shareholders as long as the aggregate value of the loan(s) is below £10,000. Otherwise there are strict legal criteria governing the giving of loans to directors.

Loans from directors

There is much less criteria involved governing the terms on which a director may lend to a company of which he/she is a director. This is more like any other commercial lending relationship. However there are still legal matters to consider and approval may be required.

To cover both these scenarios, this subfolder contains:

• a Guidance Note – Loans involving Directors, which explains the legal issues involved when there is any lending involving directors and companies;
• secured and unsecured loan agreements which record the terms of a loan given to a director of a company or a person connected with a director (these agreements should only be used where the aggregate value of the loan is below £10,000 so that shareholder approval is not required);
• a Directors’ loan secured over joint property;
• guidance on land registry applications relating to a directors’ secured loan;
• a Shareholders’ Ordinary Resolution to approve a company making a loan to a director or acting as a guarantor for a director (section 197 of the Companies Act 2006);
• a Memorandum in accordance with section 197(4) of the Companies Act 2006, containing the details of the transaction for the members to consider before approving the above ordinary resolution; and
• a long form and basic form of directors’ loan agreement covering the usual commercial terms on which a director may lend to a company.

Each document in the Directors’ Loan Agreements Sub-folder is compliant with the Companies Act 2006.

• 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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