Shareholder loan agreement template
Loan Agreement for a loan from a shareholder, containing more favourable terms for the borrowing company than a commercial loan as regards interest, repayment, events of default and other obligations.
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When do I use this document?
- for a loan to a company by an individual or corporate shareholder
- for a loan to be made in a single advance of the loan amount
- for a borrower which is a private limited company incorporated in England and Wales
What are the key features?
- short form loan agreement with less onerous provisions than a commercial loan
- 20 clauses over 10 pages
- alternative clauses depending on whether the loan is interest-free or carries interest
- flexible date to repay the loan
- undertakings from the borrower, including to provide accounting information and restrictions on dividends, granting of security and other borrowings
- events of default
What else do I need to know?
Generally, a company can be funded by its shareholders in one of two ways:
- equity: by the shareholders investing money in return for shares in the company
- debt: by the shareholders lending money to the company
If a shareholder receives equity in the company, the amount invested becomes part of the capital of the company and is not usually repayable in normal circumstances. On a winding-up of the company, the shareholder capital is only repaid once all other creditors of the company have received payment of the amounts owed to them by the company.
If a shareholder lends money to the company, the loan will be repayable by the company in accordance with the terms agreed between the shareholder and the company. These terms may include the payment of interest on the amount borrowed. On a winding-up of the company, the loan will rank equally for payment with the company’s other ordinary creditors and in priority to the company’s shareholders.
What terms are different for a shareholder loan?
A shareholder who makes a loan to a company has a joint interest in the company, as both a lender and shareholder.
The loan terms are likely to be less onerous than a third party or bank loan.
In particular:
- interest: a shareholder loan may be interest-free or with a lower interest rate than a third party loan. Interest may only be payable if the company is able to pay the interest
- repayment: a shareholder loan may only be repayable when the company is able to make repayments
- events of default: a shareholder loan may have less onerous events of default than a third party loan
When do I use this document?
- for a share sale transaction
- where confidential information about the target company will be disclosed to a potential buyer
- for a longer form NDA with strong legal protections for the seller and target company
What are the key features?
- 17 clauses over 9 pages
- definitions of Confidential Information and Proposed Transaction
- confidentiality obligations
- authorised recipients of Confidential Information
- circumstances permitting compulsory disclosure
- procedure for returning Confidential Information to the seller
- prohibition on the buyer poaching the target company’s employees
- contractual remedies for breach of the NDA, including contractual indemnity in favour of the seller and target company
- duration of agreement
What else do I need to know?
It’s quite common that some clauses of an NDA may be resisted by the receiving party. The guidance notes which accompany this document explain how provisions, such as the following, might be negotiated to reach mutual agreement.
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- non-solicitation covenants
- a contractual indemnity for breach of the confidentiality obligations
- the duration of the agreement
The guidance notes which accompany the document explain how these provisions might be negotiated to reach agreement.
What other docs are available?
For a shorter form of confidentiality agreement for a company sale transaction, see
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Updated by a lawyer on 21/07/2025
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