What is a shareholder loan agreement?
Owners often put money into their company as a loan rather than buying more shares: it is quicker, it can be repaid without reducing share capital, and it can carry interest. Without paperwork, though, it is easy to lose track of what is owed, and an accountant, bank or buyer may treat the money as something else.
This template records the amount, the date it was paid, the interest rate (or interest-free), whether interest is paid as it goes or rolled up, repayment in one go, on demand or by instalments, the events that let the lender call the loan in, whether the loan ranks behind banks and trade creditors, and confirmation that the related-party transaction was properly approved.
- Best for
- Owner-managed companies borrowing from a shareholder, director or parent company
- Signed by
- The company and the lender
- Interest
- Any rate, including interest-free
- Length
- About 2 pages, initialled on every page
When to Use a shareholder loan agreement
- A founder funding start-up costs before any outside investment
- A director covering a cash-flow gap until a customer pays
- A parent company funding a new subsidiary
- A shareholder lending to buy equipment
- A bank asking for an owner's loan to be subordinated
What You Fill In
16 blanks, then the name and email of each person who signs: company (borrower), lender.
1 The parties
- Date of this agreement*
- Company (borrower)*
- Company address
- Lender*
- Lender's relationship to the company* a shareholder · a director · a shareholder and director · a parent or group company
- Lender address
2 The loan
- Currency*
- Loan amount*
- Date the money is paid to the company*
- Purpose
3 Interest and repayment
- Interest rate (% a year)*
- Interest is* added to the loan and paid on repayment · paid every quarter · paid every year
- Repayment* in one payment on the repayment date · on demand by the Lender, giving at least 90 days' written notice · in equal monthly instalments ending on the repayment date
- Repayment date
- Ranks behind the company's other lenders?* No · Yes — subordinated to bank and trade creditors
- Governing law*
4 Who signs
- Company (borrower) signature and date, job title, initials on every page · Ideally a director other than the lender signs for the company.
- Lender signature and date, initials on every page
What the shareholder loan agreement Covers
- The loan
- Interest
- Repayment
- Immediate repayment
- Ranking
- Conflicts and approvals
- General
Using the shareholder loan agreement, step by step
1 Name the lender and the company
Enter the company as borrower and the lender, and choose the lender's relationship to the company.
2 Set the loan
Enter the currency, amount and the date the money is paid in. Add a purpose if you want one recorded.
3 Set interest and repayment
Choose the rate, how interest is paid, how and when the loan is repaid, and whether it ranks behind other creditors.
4 Sign
Have a director other than the lender sign for the company if you can. The signed PDF is kept in Files with the company's records.
Tips Before You Send It
- Tax authorities may look closely at interest-free or unusually high-rate loans between a company and its owners. Ask an accountant.
- Record the loan in the company's books and keep evidence of the transfer.
- If the lender is also the only director, check how your company's rules deal with a director approving their own transaction.
- The loan is unsecured. If you want security over company assets, that needs a separate document and possibly registration.
Sign It Online In Minutes
- Fill in the blanks. Names, dates and amounts go straight into the agreement — the preview shows exactly where.
- Name who signs. Tick “This is me” for your own part. VergeHR builds the PDF with every signature, date and initials box on the right line, and you can check or move anything before sending.
- Send it. Each signer gets a secure link and signs from any device — no account needed. The signed PDF, with an audit trail and a Certificate of Completion, is filed in Files and emailed to everyone.
Shareholder loan agreement: frequently asked questions
Should I lend to my company or buy more shares?
It depends on tax, how and when you want to take the money out, and what other investors or lenders expect. A loan can be repaid more flexibly; shares give ownership. An accountant can advise.
What does subordinated mean?
A subordinated loan is paid only after the company's other creditors, such as banks and suppliers, if the company is wound up. Banks sometimes require it before lending.
Can the loan be interest-free?
Yes. Enter 0% as the rate. Consider the tax effect first.
Is this the same as a promissory note?
A promissory note is a simple promise to repay, often used between individuals. This agreement is tailored to a company borrowing from its owner and covers approvals and ranking.