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Unsecured Loan Note for the United Kingdom

Unsecured Loan Note Template for England and Wales

An Unsecured Loan Note is a legally binding document under English and Welsh law that evidences a debt obligation where the borrower promises to repay a specific sum of money, plus interest, to the lender without providing any specific assets as security. The document sets out the terms of borrowing, including interest rates, repayment schedule, and default provisions, while operating within the framework of English commercial law and financial regulations.

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Unsecured Loan Note

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What is a Unsecured Loan Note?

An Unsecured Loan Note is commonly used in commercial financing when parties wish to document a loan arrangement without the complexity of security arrangements. This instrument is particularly relevant in English and Welsh jurisdictions where the lack of security is balanced by clear contractual obligations and remedies. The document typically includes detailed provisions on interest calculations, repayment terms, events of default, and enforcement mechanisms. Unsecured Loan Notes are often used in situations where the borrower's creditworthiness or the relationship between parties makes security unnecessary, or where a quick, straightforward lending arrangement is desired.

What sections should be included in a Unsecured Loan Note?

1. Parties: Identifies the lender and borrower with full legal names and addresses

2. Background: Context of the loan arrangement and purpose

3. Definitions: Key terms used throughout the document

4. Principal Amount: States the amount being loaned

5. Interest: Interest rate, calculation method, and payment terms

6. Repayment Terms: Schedule and method of repayment

7. Events of Default: Circumstances constituting default and consequences

8. Governing Law: Specification of applicable law and jurisdiction

What sections are optional to include in a Unsecured Loan Note?

1. Representations and Warranties: Used for complex commercial loans to provide assurance about borrower's status - typically included for corporate borrowers or high-value loans

2. Covenants: Ongoing obligations of the borrower - typically included for commercial loans or where specific borrower behavior needs to be controlled

3. Transferability: Rights to transfer or assign the loan note - included when the note might be traded or transferred

4. Tax Gross-Up: Provisions for tax treatment of payments - relevant for cross-border loans or where tax implications are significant

What schedules should be included in a Unsecured Loan Note?

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

2. Interest Calculation Examples: Examples showing how interest is calculated

3. Form of Transfer Certificate: Standard form for transferring the note if transferability is permitted

4. Notice Details: Contact information and acceptable methods for notices

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

Promissory Note

Sector

Banking

Cost

Free to use
Relevant legal definitions


























Clauses

























Industries

Companies Act 2006: Primary legislation governing company borrowing, securities, and registration requirements for charges. Though unsecured notes don't require registration, general company borrowing provisions apply.

Financial Services and Markets Act 2000 (FSMA): Regulates financial services and markets, including restrictions on financial promotions, regulatory framework for financial instruments, and provisions regarding transferable securities.

Consumer Credit Act 1974: Relevant if the loan is to an individual rather than a business. Sets out requirements for form and content of credit agreements and consumer protection measures.

Law of Property Act 1925: Establishes general principles regarding the creation and transfer of property rights under English law.

FCA Regulations: Financial Conduct Authority regulations applicable if the note is considered a regulated investment product or involves public offering elements.

UK Listing Rules: Relevant if the notes are to be listed or traded on a regulated market or exchange.

Income Tax Act 2007: Governs the tax treatment of interest payments and withholding tax obligations for loan notes.

Corporation Tax Act 2009: Determines the tax treatment for corporate issuers and holders of loan notes.

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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