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Document Description
A director/shareholder loan agreement is a contractual agreement that sets out the details, such as interest rate, repayment and other necessary terms, of a loan made by a director/shareholder to a business.
With such an agreement, it provides a way for directors/shareholders to provide financing to the company, especially for startups that may not qualify for conventional bank loans, but at the same time establishes that the money is indeed a loan and not a gift to the company. In some circumstances, this agreement can be structured as interest-free and repayable on demand, providing higher flexibility when compared to a commercial loan agreement. Afterall, it protects both the lender and borrower by comprehensively documenting the loan terms in a legally binding contract.
How to use this Document?
This document should be read carefully by the borrower and lender.
Both the borrower and lender should sign and return a copy, and once signed, both parties should get a copy. To avoid any future disputes, both parties may wish to have their signatures witnessed.
If either party wishes to amend the agreement in the future, both parties should agree to do, and the original agreement and amendments should be recorded in writing and signed by both parties.
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