Loan agreement

About this document

This agreement is for use when the party borrowing money is a company or other corporate body, or a trust.

It is drawn so that lender is also a corporate body, but he, she or it may as easily be an individual or a trust.

We have provided for both a personal guarantee and for other security in the form of shares or other financial assets.

The loan is secured by lodging documentary securities with the lender. Where there is no paper copy of evidence of ownership, this document provides the evidence that the item is secured to the lender.

If the value of the security falls below a specified level, the lender can call on the borrower to top it up. In addition, at any time, and without giving a reason, the lender may call for the transfer of title to any or all of the securities to him. If there is no accepted system of registration of ownership, that is the only way the lender would be protected in situations of default.

Additionally, the reason for the transfer should be set down in a letter so that the security can be passed back to the owner when the loan has been repaid, without tax or other problems.

The guarantee is worded to cover every obligation that a borrower might have. If a guarantee is not required, it may be deleted easily.

Because it is a company that is borrowing the money, we have included a number of warranties. These take effect as promises by the borrower as to aspects of its financial state. We have also provided that the signatory accepts personal liability for his proper authorisation. To some extent that person is bound in the same way as the company.

Registration of the charge

If the borrower is a company then it is required to register the charge at Companies House.

This agreement provides explicitly that the company will register the charge contained in it. The debt will then be valid against  a liquidator or administrator, should the company become insolvent.

When the debt is repaid, whether fully or in part, the company has no obligation to inform Companies House. However, it is in the company's own interests that potential investors and lenders are aware that it has satisfied all or part of the debt.

You can read further about choosing an appropriate form of security.

Similar documents

If it is a person borrowing, rather than a company or corporate body, then this agreement is more suitable.

Main provisions

• Definitions and important interpretation provisions

• Borrower’s warranties

• Amount of loan and how advanced

• The security

• Interest amount and arrangements

• Repayment provisions

• Promise by borrower to make no change to capital structure.

• What happens if things go wrong - notices, consequences and so on

• An option on possible assignment of the rights and obligations set up under the agreement.

• The guarantor’s promises

• A round up of legal matters