Shareholder Loan Agreement

Free Shareholder Loan Agreement Template

Use this free template as a starting point for documenting a loan from a shareholder to a company (or, less commonly, from a company to a shareholder). Copy and customise it to suit your loan amount, interest treatment, repayment schedule, and tax position.

SHAREHOLDER LOAN AGREEMENT

Date: [Date of agreement]

Lender: [Full name of lending shareholder], of [Address] (the "Lender")

Borrower: [Company name], a company incorporated in [Jurisdiction] with company number [Number] and registered office at [Address] (the "Borrower" or the "Company")

Background

A. The Lender is a shareholder of the Borrower, holding [Number] [Class] shares.

B. The Lender has agreed to lend, and the Borrower has agreed to borrow, the principal sum set out below on the terms of this Agreement.

C. The Parties intend this Agreement to record the loan accurately for tax, accounting, and corporate governance purposes.

1. Loan Amount and Purpose

• Principal amount: [Currency and amount in numerals and words] (the "Loan")
• Purpose: [Working capital / Specific project / Bridge financing / Other]
• The Loan shall be applied solely for the agreed purpose. The Lender is entitled to receive reasonable evidence of how the funds have been applied.

2. Drawdown

• The Lender shall transfer the Loan to the Borrower's nominated bank account on or before [Drawdown date].
• The Loan may be drawn in [a single tranche / instalments as set out in Schedule [1]].

3. Interest (select the applicable option)

[Option A: Interest-bearing]

• Interest rate: [X]% per annum, calculated on the outstanding principal on a [daily / monthly] basis (actual / 365 day count)
• Interest accrues from the date of drawdown until full repayment
• Interest is payable [monthly / quarterly / annually / on repayment of the Loan]
• The interest rate has been set at, or above, the official rate of interest published by HMRC (or the applicable tax authority) on the date of this Agreement to avoid any deemed taxable benefit

[Option B: Interest-free]

The Loan is interest-free. The Parties acknowledge that interest-free shareholder loans may give rise to tax consequences (for example, deemed distributions or beneficial loan provisions) and have taken advice on this point.

4. Repayment

• Repayment date: [Specific date / On demand by the Lender with at least [30] days' written notice / In instalments per Schedule [2]]
• Method: by bank transfer to the Lender's nominated account
• Early repayment: the Borrower may repay all or any part of the Loan at any time without penalty, subject to clearance of any accrued interest to the date of repayment
• Order of application: payments are applied first to accrued interest, then to outstanding principal

5. Security (optional; include if applicable)

The Loan is secured by [a debenture / fixed and floating charge / personal guarantee / other security] dated [Date] granted by the Borrower in favour of the Lender. The security shall be released on full repayment of the Loan and all accrued interest.

Or: This Loan is unsecured. The Lender shall rank as an unsecured creditor of the Borrower in any insolvency.

6. Subordination (optional; include if applicable)

The Lender agrees that the Loan is subordinated to all senior debt of the Borrower (including any bank facilities or secured creditors). The Lender shall not enforce repayment of the Loan if doing so would put the Borrower in default of any senior debt obligation.

7. Borrower's Covenants

The Borrower shall:

• Apply the Loan only for the agreed purpose
• Keep the Lender reasonably informed of any matter that may materially affect the Borrower's ability to repay
• Maintain accurate accounting records of the Loan
• Notify the Lender promptly of any insolvency event, material litigation, or material change of control

8. Events of Default

The Loan becomes immediately repayable, at the Lender's option, on the occurrence of any of the following:

• Failure to pay any sum due under this Agreement within [14] days of the due date
• Material breach of this Agreement not remedied within [21] days of written notice
• The Borrower becoming insolvent, entering administration, liquidation, or making any arrangement with its creditors
• A change of control of the Borrower without the Lender's prior written consent (other than as part of a permitted shareholding restructure)

9. Tax Treatment

• The Parties acknowledge that the tax treatment of this Loan depends on the applicable tax rules in the Borrower's and Lender's jurisdictions of residence.
• The Borrower shall account for any tax obligations arising under participator loan rules (e.g. UK s.455 corporation tax on loans to participators), if applicable.
• The Lender is responsible for declaring any interest income in their personal tax returns.
• The Parties recommend that each takes independent tax advice in connection with this Agreement.

10. Corporate Authority

The Borrower confirms that the Loan has been duly authorised by its board of directors (and, where required, by its shareholders) and complies with the Borrower's articles of association and any shareholders' agreement. A copy of the authorising resolution is attached as Schedule [3].

11. Governing Law and Jurisdiction

This Agreement is governed by the laws of [Jurisdiction] and the Parties submit to the exclusive jurisdiction of the courts of [Jurisdiction].

Signatures:

The Lender:

_ Date: _ [Lender name]

For and on behalf of the Borrower:

_ Date: _ [Director name], Director

_ Date: _ [Director or Secretary name], [Position]

This is a basic template provided for informational purposes. For a professionally generated and legally tailored document, use Bind's contract automation platform.