Template Shareholder Loan to Company

Shareholders’ Long Form Loan Agreement – Loan to Company

CO.LAT.13

This Shareholders’ Loan Agreement – Loan to Company is a loan agreement designed for a shareholder making a loan to the company that he or she is a shareholder of.  

Funds permitting, companies may prefer to borrow from their own shareholders, particularly if they cannot access funding from elsewhere or because the loan may be cheaper and more convenient than external third party funding.

Shareholders may make loans to companies on the same basis as any commercial organisation. However there may be issues regarding the taking of security and conflicts of interest that should be considered before entering into the loan. As these are similar to the issues that relate to a director making a loan to a company, our Guidance Note – Loans Involving Directors may be helpful in identifying and considering these issues.

Whilst this template is very similar in substance to our Directors’ Loan Agreement - Loan to a Company, it has important differences, most particularly more conditions precedent to the making of the loan. This is to add greater protection for a shareholder who may not have the same level of knowledge or access to information that a director making a loan to a company may have.

This Shareholders’ Loan Agreement contains the following clauses:

  1. Background
  2. Definitions and Interpretation
  3. The Facility
  4. Purpose
  5. Drawdown
  6. Conditions Precedent
  7. Interest
  8. Repayments
  9. Payments
  10. Value Added Tax
  11. Security
  12. Representations and Warranties
  13. Covenants
  14. Events of Default
  15. Assignment and Transfer
  16. Set-off
  17. Remedies, Waivers, Amendments and Consents
  18. Severance
  19. Third Party Rights
  20. Communications
  21. Governing Law and Jurisdiction

Schedule 1: Repayment Schedule

Schedule 2: Drawdown Notice

Schedule 3: Security Documents

Shareholders lending to companies may choose to lend on less restrictive terms than some of these clauses. The clauses in square brackets can/should be deleted if not required.

NOTE: This Agreement is not intended to be regulated by the Consumer Credit Act 1974.

This Shareholders’ Loan Agreement is in open format. Either enter the requisite details in the highlighted fields or adjust the wording to suit your purposes.

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