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Profit Sharing Loan Agreement for the United Kingdom

Profit Sharing Loan Agreement Template for England and Wales

A Profit Sharing Loan Agreement under English and Welsh law is a specialized financing arrangement where the lender provides funds to the borrower in exchange for both repayment of the principal and a share of the profits generated from the borrower's business or specific project. This agreement details the loan terms, profit calculation methodology, payment schedules, and any security arrangements. It combines elements of traditional debt financing with equity-like returns, making it particularly suitable for growth-focused businesses or specific project financing.

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Profit Sharing Loan Agreement

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What is a Profit Sharing Loan Agreement?

The Profit Sharing Loan Agreement is utilized when parties seek to establish a financing arrangement that aligns the interests of both lender and borrower through profit sharing. This document, governed by English and Welsh law, is particularly relevant for businesses seeking alternative financing structures or projects where traditional fixed-interest loans may not be suitable. It includes detailed provisions for profit calculation, distribution mechanisms, reporting requirements, and protections for both parties. The agreement is commonly used in project finance, real estate development, and business expansion scenarios where the lender's return is partially tied to the borrower's success.

What sections should be included in a Profit Sharing Loan Agreement?

1. Parties: Identification and details of the lender and borrower

2. Background: Context of the agreement and relationship between parties

3. Definitions: Key terms used throughout the agreement

4. Loan Amount and Purpose: Specification of the loan amount and its intended use

5. Profit Sharing Mechanism: Details of how profits will be calculated and shared

6. Payment Terms: Timing and method of profit share payments

7. Duration and Repayment: Term of the loan and repayment conditions

8. Representations and Warranties: Statements of fact and assurances given by the borrower

9. Covenants: Ongoing obligations of the borrower during the loan term

10. Events of Default: Circumstances that trigger default and remedies available

11. Boilerplate Provisions: Standard legal provisions including notices, governing law, and jurisdiction

What sections are optional to include in a Profit Sharing Loan Agreement?

1. Security: Details of any security or collateral arrangements when the loan is secured against assets

2. Guarantees: Terms of any guarantees provided when third-party guarantees are involved

3. Information Rights: Lender's rights to financial information for complex profit sharing arrangements

4. Change of Control: Provisions dealing with changes in ownership or control of the borrower

5. Assignment and Transfer: Rights and restrictions regarding transfer of the loan or agreement

What schedules should be included in a Profit Sharing Loan Agreement?

1. Profit Calculation Schedule: Detailed methodology for calculating profit share

2. Form of Draw Down Notice: Template for requesting loan disbursements

3. Security Documents: Details of security arrangements if applicable

4. Financial Reporting Requirements: Specified format and frequency of financial reports

5. Form of Compliance Certificate: Template for periodic confirmation of compliance with agreement terms

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Document Type

Finance Agreement

Cost

Free to use
Relevant legal definitions






























Clauses






























Industries

Financial Services and Markets Act 2000: Primary legislation governing financial services regulation in the UK, establishing regulatory framework and requirements for financial activities

Financial Services Act 2012: Updates to financial services regulation, including establishment of FCA and PRA regulatory structure

Consumer Credit Act 1974: Regulates credit agreements and consumer lending, may be applicable if the profit sharing loan involves consumer lending

FCA Regulations: Financial Conduct Authority regulatory requirements and guidelines for financial services and lending activities

Small and Medium Sized Business (Finance Platforms) Regulations 2015: Regulations governing lending platforms and finance arrangements for SMEs

Contracts (Rights of Third Parties) Act 1999: Governs how third parties may enforce terms of a contract, relevant for assignment and transfer provisions

Unfair Contract Terms Act 1977: Controls unfair terms in contracts, particularly regarding limitation of liability and reasonableness

Consumer Rights Act 2015: Protects consumer rights and regulates business-to-consumer contracts if applicable

Income Tax Act 2007: Tax legislation relevant to the treatment of profit shares and loan interest for income tax purposes

Corporation Tax Act 2010: Governs taxation of corporate entities, relevant for corporate borrowers and lenders

Insolvency Act 1986: Regulates insolvency proceedings and creditor rights in case of default or bankruptcy

Enterprise Act 2002: Contains provisions affecting corporate insolvency and business arrangements

Companies Act 2006: Primary legislation governing company operations, including corporate borrowing and security arrangements

Proceeds of Crime Act 2002: Anti-money laundering legislation requiring due diligence and reporting of suspicious transactions

Money Laundering Regulations 2017: Detailed requirements for anti-money laundering procedures and checks

UK GDPR: Post-Brexit data protection regulation governing the processing of personal data

Data Protection Act 2018: UK's implementation of data protection requirements, including processing of financial information

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks, 聽Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination, 聽Severance Pay, Governing Law, Entire Agreemen

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