A template loan agreement for a loan between a company and its director or shareholder (in either direction), governed by the law of England & Wales.
⚠️ Loans to directors may need members' approval. Under the Companies Act 2006 (section 197 and related provisions), a company generally needs shareholder approval before making a loan to a director (with some exceptions, such as small loans). And loans from a close company to a participator can trigger a tax charge (often called the "section 455" charge) and benefit-in-kind issues. Take accountancy and legal advice before lending to a director/shareholder.
How to use this template - Replace every
[SQUARE-BRACKET]field before use, and identify clearly who is lender and who is borrower. - Record the approval/authority for the loan (board minute, and members' approval if required). - Have a solicitor/accountant review before use.
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THIS LOAN AGREEMENT is made on [DATE]
BETWEEN (1) [LENDER NAME] of [ADDRESS / COMPANY NUMBER] (the "Lender"); and (2) [BORROWER NAME] of [ADDRESS / COMPANY NUMBER] (the "Borrower").
(Complete according to the direction of the loan, company to director/shareholder, or director/shareholder to company.)
Agreed terms
1. The loan. The Lender lends the Borrower £[AMOUNT] (the "Loan") on the terms below.
2. Purpose. The Loan is for [PURPOSE / general purposes].
3. Interest. Interest accrues at [NUMBER]% per annum [or: the Loan is interest-free]. (Note: interest-free or below-market loans can have tax consequences, take advice.)
4. Repayment. The Borrower will repay the Loan [on demand / on [DATE] / by instalments per Schedule 1]. The Borrower may repay early without penalty.
5. Authority. The parties confirm that the loan has been properly authorised, including, where required, by the board and by the members of the company under the Companies Act 2006.
6. Events of default. The Loan becomes immediately repayable if the Borrower fails to pay when due (and does not remedy within [NUMBER] days) or becomes insolvent.
7. Set-off (optional). [Where the Borrower is a director/employee, set out any agreed right of set-off against sums owed, noting wage-deduction rules apply to employees.]
8. Governing law and jurisdiction. This Agreement is governed by the law of England and Wales, whose courts have exclusive jurisdiction.
Execution
Signed by/for [LENDER NAME]: __________________ Date: [DATE]
Signed by/for [BORROWER NAME]: __________________ Date: [DATE]
Schedule 1, Repayment schedule (if any)
--- This template is a starting point and not legal or tax advice. Loans involving directors/shareholders raise company-law approval and tax issues, have a qualified solicitor and accountant review before use. Governing law: England & Wales.
[DRAFT - requires solicitor / accountant review before use]