Company Loan Agreements UK: Key Terms & Clauses

What this document is

A company loan agreement is a written contract that sets out the terms on which one party (the lender) hands over money to another party (the borrower), on the understanding that it will be paid back. In a company context, the borrower or the lender (or both) is a limited company, and the document is usually signed by a director on the company's behalf.

The agreement records the amount being lent, how and when it must be repaid, what interest is payable, and what rights the lender has if the borrower stops paying. It can be a short one-page facility between family members and their own company, or a lengthy institutional document running to dozens of pages.

Whatever the length, the purpose is the same: to turn an informal understanding into an enforceable contract that a court would recognise. For companies, a written agreement is also important for accounting, tax treatment, and, where directors are involved, for meeting the disclosure and approval rules in the Companies Act 2006.

How to use this document

1. Agree the commercial terms first. Before anyone opens a template, the parties need to settle the basics: how much is being lent, for how long, at what interest rate, and whether any security is being offered. Writing these down in a short term sheet avoids drafting a document that then has to be rewritten when someone changes their mind.
2. Check the company's authority to borrow or lend. Directors need to make sure the company's articles allow the transaction and that any required board resolution is passed. If the loan involves a director personally, shareholder approval may be required under the Companies Act 2006. This step is often skipped and causes problems later during audits or due diligence.
3. Draft the agreement with the key clauses. The document should cover the loan amount, interest, repayment dates, events of default, and remedies. It should also deal with practical matters such as how notices are served, which law governs the contract, and whether the lender can transfer the loan to someone else. Each clause should reflect what the parties actually agreed.
4. Deal with security and registration. If the loan is secured over company assets, such as property, shares, or a debenture over the whole business, the charge normally needs to be registered at Companies House within the statutory time limit. Missing the registration deadline can make the security void against other creditors, which defeats the point of taking it.
5. Sign, date, and keep proper records. Both parties should sign the agreement, and the company should keep a signed copy with its statutory books. Payments in and out should be recorded against the loan account, and any changes to the terms should be documented in writing rather than agreed by email or over the phone.

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