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Shareholder Loan Promissory Note for the United Kingdom

Shareholder Loan Promissory Note Template for England and Wales

A Shareholder Loan Promissory Note is a legally binding document under English and Welsh law that evidences a loan made by a shareholder to their company. It details the loan amount, interest rate, repayment terms, and conditions of default. The document serves as formal acknowledgment of the debt and provides protection for both the lending shareholder and the borrowing company by clearly setting out the terms of the arrangement.

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Shareholder Loan Promissory Note

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What is a Shareholder Loan Promissory Note?

A Shareholder Loan Promissory Note is commonly used when a company requires additional funding and a shareholder is willing to provide it through a loan rather than equity investment. This document, governed by English and Welsh law, formalizes the arrangement and protects both parties' interests. It includes essential details such as the loan amount, interest rate, repayment schedule, and default provisions. The note is particularly useful for maintaining clear records for tax purposes and ensuring compliance with company law requirements regarding related party transactions.

What sections should be included in a Shareholder Loan Promissory Note?

1. Parties: Identifies the lender (shareholder) and borrower (company)

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

3. Definitions: Key terms used throughout the document

4. Loan Amount and Purpose: Specified amount and intended use of funds

5. Interest Rate: Terms of interest payment, if applicable

6. Repayment Terms: Schedule and method of repayment

7. Events of Default: Circumstances triggering immediate repayment

8. Governing Law: Specification of English and Welsh law

What sections are optional to include in a Shareholder Loan Promissory Note?

1. Security: Details of any security/collateral - used when loan is secured

2. Subordination: Ranking of loan against other debts - used when company has other creditors

3. Tax Gross-Up: Provisions for tax treatment - used when tax implications need specific addressing

4. Assignment: Rights to transfer the loan - used when transfer rights are important

What schedules should be included in a Shareholder Loan Promissory Note?

1. Repayment Schedule: Detailed breakdown of repayment dates and amounts

2. Calculation of Interest: Formula and examples of interest calculations

3. Form of Notice: Template for formal communications between parties

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

Companies Act 2006: Primary legislation governing company operations, including provisions for loans to companies and directors, requirements for company records, and directors' duties and responsibilities

Consumer Credit Act 1974: Legislation potentially relevant if the shareholder is lending as an individual, though typically not applicable for business-to-business loans

Financial Services and Markets Act 2000: Governs financial promotions and regulated activities in the UK financial sector

Corporation Tax Act 2009: Covers tax treatment of loan relationships and transfer pricing implications for corporate lending

Income Tax Act 2007: Addresses tax implications for the lender and considerations for interest-bearing loans

Law of Property (Miscellaneous Provisions) Act 1989: Sets out requirements for executing deeds and other property-related matters that may affect loan security

Insolvency Act 1986: Determines the ranking of shareholder loans in insolvency and rules regarding preference payments

Small Business, Enterprise and Employment Act 2015: Establishes transparency requirements for business operations and lending

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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