When it comes to running a business, it’s not uncommon for shareholders to lend money to the company. This type of loan is known as a shareholder loan and is often used when a company needs additional funding to cover expenses or invest in new opportunities. As a business owner, it’s important to ensure that any shareholder loans are properly documented with a shareholder loan agreement. In this article, we’ll provide you with a sample shareholder loan agreement to help you get started.
What is a Shareholder Loan Agreement?
A shareholder loan agreement is a contract between a company and one of its shareholders. The agreement outlines the terms of a loan, including the amount, interest rate, repayment terms, and any other relevant details. This agreement is essential in protecting both the company and the shareholder, as it clearly sets out the expectations and obligations of each party.
Why is a Shareholder Loan Agreement Important?
A shareholder loan agreement is important for several reasons. For one, it helps avoid misunderstandings between the company and the shareholder. By clarifying the terms of the loan, both parties can be certain of their rights and responsibilities. Additionally, by documenting the loan in writing, it can be easier to enforce in court if the need arises.
Sample Shareholder Loan Agreement
To help you get started, we’ve provided a sample shareholder loan agreement below. Keep in mind that this is only an example and should be customized based on your specific needs and circumstances.
[City, State ZIP Code]
This loan agreement (“Agreement”) is made and entered into on [Date] by and between [Company Name], a [State] corporation with a mailing address of [Address], and [Shareholder Name], with a mailing address of [Address] (“Lender”).
A. The Company desires to borrow money from the Lender.
B. The Lender is willing to extend a loan in the amount of [Loan Amount] to the Company on the terms and conditions set forth in this Agreement.
C. The Company and the Lender wish to set forth their agreement in writing.
In consideration of the mutual promises and covenants contained in this Agreement, the Company and the Lender agree as follows:
1. Loan. The Lender agrees to loan to the Company the sum of [Loan Amount] (the “Loan”).
2. Interest. The Loan shall bear interest at a rate of [Interest Rate] per annum.
3. Repayment. The Company shall repay the Loan, together with accrued interest, in full on or before [Maturity Date].
4. Use of Proceeds. The proceeds of the Loan shall be used solely for the following purposes: [Insert purpose of loan].
5. Security. The Loan shall be unsecured.
6. Representations and Warranties of Company. The Company represents and warrants that: (a) it is a duly organized and validly existing entity in good standing under the laws of the state of [State]; (b) it has full authority to enter into this Agreement; (c) it is not in default under any other agreement to which it is a party; and (d) the execution, delivery, and performance of this Agreement do not violate any law, regulation, or order of any court or governmental agency.
7. Representations and Warranties of Lender. The Lender represents and warrants that: (a) he/she/it has full authority to enter into this Agreement; (b) he/she/it is not in default under any other agreement to which he/she/it is a party; and (c) the execution, delivery, and performance of this Agreement do not violate any law, regulation, or order of any court or governmental agency.
8. Default. If the Company fails to repay the Loan in accordance with the terms of this Agreement, the Lender shall have the right to pursue any and all remedies available at law or in equity.
9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of [State].
10. Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Lender with respect to the Loan and supersedes all prior negotiations, understandings, and agreements.
11. Counterparts. This Agreement may be executed in counterparts, and each counterpart shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Loan Agreement as of the date first above written.
Note: This is only a sample shareholder loan agreement and should not be considered legal advice. It is always recommended to consult with an attorney when drafting legal documents.