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Founder Loan Agreement for the United Kingdom

Founder Loan Agreement Template for England and Wales

A legally binding agreement governed by English and Welsh law that establishes the terms and conditions under which a company provides a loan to one of its founders. The agreement details the loan amount, interest rates, repayment terms, default provisions, and any security arrangements. It ensures compliance with UK company law requirements regarding director loans and includes necessary corporate approvals and disclosures.

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What is a Founder Loan Agreement?

A Founder Loan Agreement is commonly used when a company provides financial support to its founder, typically during early stages of business development or for specific purposes such as share purchase. Governed by English and Welsh law, this agreement must comply with Companies Act 2006 requirements regarding loans to directors and ensure proper corporate governance. The document typically includes loan terms, security arrangements (if any), repayment schedules, and default provisions, while addressing tax implications and corporate approval requirements.

What sections should be included in a Founder Loan Agreement?

1. Parties: Identification of the lender (company) and borrower (founder)

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

3. Definitions: Key terms used throughout the agreement

4. Loan Amount and Purpose: Specification of loan amount and intended use

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. Representations and Warranties: Standard assurances from both parties

What sections are optional to include in a Founder Loan Agreement?

1. Security: Details of any collateral or guarantees - include when loan is secured

2. Early Repayment: Terms for early loan settlement - include if early repayment is permitted

3. Board Approval: Confirmation of corporate approvals - include when required by articles or law

4. Tax Provisions: Treatment of tax implications - include for complex tax arrangements

What schedules should be included in a Founder Loan Agreement?

1. Repayment Schedule: Detailed payment dates and amounts

2. Form of Draw Down Notice: Template for requesting loan disbursement

3. Security Documents: Details of any security arrangements

4. Corporate Approvals: Copies of relevant board resolutions

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Ƶ

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions






























Clauses






























Industries

Companies Act 2006: Primary legislation governing company operations, including directors' duties, requirements for board/shareholder approval of loans, and disclosure requirements for company-director transactions

Consumer Credit Act 1974: Regulates credit agreements and may apply if the founder loan could be classified as a consumer credit arrangement, setting out specific regulatory requirements

Financial Services and Markets Act 2000: Establishes the regulatory framework for financial services in the UK, relevant if the loan arrangement involves regulated activities

Insolvency Act 1986: Contains provisions regarding creditor treatment, transactions at undervalue, and director obligations during insolvency scenarios

Law of Property Act 1925: Relevant legislation if the founder loan is secured against property assets

Contract Law (Common Law): Fundamental principles governing contract formation, consideration, terms and conditions, and remedies for breach

Late Payment of Commercial Debts (Interest) Act 1998: Establishes statutory interest rates applicable to late payments in commercial transactions

Consumer Rights Act 2015: Governs the fairness of contract terms, particularly relevant if the founder could be considered a consumer

UK Tax Legislation: Various tax laws affecting loan agreements, including Income Tax, Corporation Tax, and benefits-in-kind implications

GDPR and Data Protection Act 2018: Data protection regulations governing the handling and processing of personal data in loan documentation

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,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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