Shareholders’ Long Form Loan Agreement – Loan to Company
This Shareholders’ Loan Agreement - Loan to Company is designed for a shareholder making a loan to a company in which they hold shares. It provides a structured way to document the loan terms where the lender is not a third party funder, but an investor lending into their own company.
Why Companies Use Shareholder Funding
Where funds allow, a company may prefer to borrow from its shareholders, particularly if external funding is not available or where shareholder funding is cheaper or more convenient than third party finance.
Key Issues To Consider
A shareholder can lend to a company on commercial terms, but the parties should consider potential conflicts of interest and, where relevant, whether any security is being taken. Because these issues can overlap with director-related lending, the Guidance Note - Loans Involving Directors may also be helpful.
How This Differs From A Director Loan
This template is similar in substance to Directors’ Loan Agreement - Loan to Company, but it includes important differences, in particular more conditions precedent. This is intended to give a shareholder lender greater protection where they may not have the same level of information access as a director lender.
What This Template Covers
The agreement covers the facility and purpose, drawdown and conditions precedent, interest and repayments, payment mechanics and VAT, security (where used), representations and warranties, covenants, events of default, assignment and transfer, set-off, remedies and waivers, communications, and governing law and jurisdiction. It also includes a repayment schedule (Schedule 1), a drawdown notice (Schedule 2), and security documents (Schedule 3).
Flexibility
Shareholders may choose to lend on less restrictive terms than some of the provisions in this agreement. Optional clauses are included in square brackets and can be removed if not required.
Consumer Credit Act Point
NOTE: This Agreement is not intended to be regulated by the Consumer Credit Act 1974.
Shareholders’ Long Form Loan Agreement – Loan to Company is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.