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Directors Lending to Companies

October 2014
We already have a broad range of loan & finance templates for you to use, however there are now new loan templates specifically to use when you plan on making a loan as a director (or shareholder) to a company. This will allow you to record the terms of your transaction and apportion the risk between you and your company.

Many company directors (or shareholders) will wish to make a loan or loans to the company they are directors (or shareholders) of at some stage. This is particularly so if a company is just starting out or needs to ease its cash flow and is looking for alternatives to bank finance. Directors’ will usually lend on more favourable terms than an external third party.

The new material added includes:

• A guidance note – Loans involving directors; to walk you through all the legal issues involved when there is any lending involving directors and companies;
• A long form Directors’ Loan Agreement covering the usual commercial terms on which a director may lend to a company; and
• A basic form Directors’ Loan Agreement based on the above but in a more straightforward and simple document where directors do not require security, representations, warranties and covenants to be put in place as a pre-condition to lending.

There is no “standard” loan agreement that directors’ should use when lending to companies as much will depend upon the circumstances of the lending and the purpose the loan is to fulfil. However these documents are a very useful starting point for you when considering this type of loan and have been written for company directors, secretaries and administrators considering this type of loan arrangement.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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