Document background
The Shareholder Loan Agreement is commonly used in Saudi Arabia when a company requires additional financing and a shareholder is willing to provide it. This arrangement is particularly useful for companies that may have limited access to traditional banking facilities or prefer internal financing solutions. The agreement must be structured to comply with both Saudi Companies Law and Shariah principles, which prohibit conventional interest-based lending. The document typically includes detailed provisions on the loan amount, profit rate structure, repayment terms, security (if any), and events of default. It's essential for documenting the rights and obligations of both the shareholder-lender and the borrowing company, while ensuring that the financing structure remains Shariah-compliant throughout its term.
