Director Loan Agreements
This collection comprises an essential collection of documents and guidance materials focused on director loan agreements.
These agreements outline the specific terms and conditions under which a director either lends money to their company or borrows money from it. The contents vary according to the security provided for the loan and its intended purpose.
Please note that, for secured loans, the legal issues surrounding the taking of security are complex and there are a number of issues that need to be addressed in order for a lender to enforce its security, such as:
- The loan agreement must contain a right of enforcement (including detailed provisions regarding when and how a lender can enforce its security). Ideally the enforcement provisions should be tailored to reflect the nature of the secured asset.
- The lender must formally demand repayment.
- There must be some agreement as to how the lender takes possession of the secured assets (or in some cases, ownership must pass in order for the security to be valid – for example, in the case of a legal mortgage of shares).
- The loan agreement must contain a power of sale in relation to the secured assets.
- The security may be invalid unless registered at Companies House and in the borrower’s company registers.
- If an individual or partnership provides security over chattels, the requirements of the rather arcane Bills of Sale Act (1878) must be complied with.
In view of the complexity of taking security, you are advised to take legal advice to ensure that the proposed security is enforceable in the event of default in repayment.
- Guidance Notes: Loans Involving Directors
- Director’s Loan Agreement - Unsecured
- Director’s Loan Agreement - Secured
- Director’s Loan – Secured over Joint Property
- Directors’ Long Form Loan Agreement – Loan to Company
- Directors’ Loan Agreement Basic Form – Loan to Company
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