The Founder Loan Agreement is utilized when a company needs to formalize a lending arrangement with one of its founders, typically arising during early-stage business operations or when founders require additional financial support. This document is crucial in Australian business contexts where strict regulations govern related-party transactions and corporate lending. It must comply with Australian corporate law, particularly the Corporations Act 2001 and tax legislation including Division 7A requirements. The agreement details loan terms, repayment schedules, security arrangements, and default provisions while addressing potential conflicts of interest. It's particularly important for maintaining clear financial boundaries between the company and its founders, ensuring proper corporate governance, and protecting both parties' interests.
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1. Parties: Identifies the lender (usually the company) and borrower (the founder)
2. Background: Context of the loan, relationship between parties, and purpose of the agreement
3. Definitions and Interpretation: Key terms used throughout the agreement and rules for interpretation
4. Loan Amount and Purpose: Specifies the loan amount and permitted use of funds
5. Interest: Interest rate, calculation method, and payment frequency
6. Repayment Terms: Repayment schedule, method, and conditions
7. Representations and Warranties: Standard declarations by both parties about their capacity and authority
8. Default Events: Circumstances constituting default and consequences
9. Tax Provisions: Treatment of tax implications and Division 7A compliance requirements
10. General Provisions: Standard boilerplate clauses including notices, amendments, and governing law
1. Security: Required if the loan is secured against any assets or guarantees
2. Conversion Rights: Include if the loan can be converted to equity
3. Multiple Borrower Provisions: Required if multiple founders are borrowing under the same agreement
4. Special Repayment Events: Include if early repayment is triggered by specific events like exit or capital raising
5. Subordination: Required if the loan needs to be subordinated to other company debt
6. Director Duties: Include specific provisions about managing conflicts of interest if the founder is a director
1. Loan Details Schedule: Specific details of loan amount, interest rate, and repayment schedule
2. Security Details: Description of any security provided for the loan
3. Repayment Schedule: Detailed breakdown of repayment dates and amounts
4. Division 7A Compliance Terms: Specific terms required for Division 7A compliance
5. Form of Drawdown Notice: Template for requesting loan disbursements if multiple draws are permitted
6. Deed of Subordination: If required, terms of subordination to other debt
Relevant legal definitions
Clauses
Relevant Industries
Technology
Financial Services
Professional Services
Manufacturing
Retail
Healthcare
Education
Real Estate
Media and Entertainment
Agriculture
Construction
Hospitality
Relevant Teams
Legal
Finance
Corporate Governance
Executive Leadership
Compliance
Tax
Treasury
Company Secretariat
Relevant Roles
CEO
Managing Director
Company Director
Chief Financial Officer
Financial Controller
Company Secretary
General Counsel
Legal Counsel
Corporate Lawyer
Finance Manager
Compliance Officer
Tax Manager
Founder
Co-Founder
Executive Director
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