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Founder Loan Agreement

Founder Loan Agreement Template for Hong Kong

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Key Requirements PROMPT example:

Founder Loan Agreement

"I need a Founder Loan Agreement under Hong Kong law for a HKD 2 million unsecured loan from my technology startup to me as the founding CEO, with quarterly interest payments and full repayment due by March 2025."

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Document background
The Founder Loan Agreement is a crucial document used when a company registered in Hong Kong extends a loan to one of its founders. This arrangement typically occurs during company growth phases, when founders need additional funding but prefer not to dilute their equity or seek external financing. The agreement must comply with Hong Kong's Companies Ordinance, particularly regarding related party transactions and directors' duties. It includes detailed terms covering the loan amount, interest calculations, repayment schedule, default provisions, and any security arrangements. The document also addresses the complex relationship between the founder's roles as both borrower and company stakeholder, ensuring proper corporate governance and transparency in accordance with Hong Kong law.
Suggested Sections

1. Parties: Identifies the founder as borrower and the company as lender, including their full legal names and addresses

2. Background: Sets out the context of the loan, including the founder's relationship with the company and the purpose of the loan

3. Definitions: Defines key terms used throughout the agreement

4. Loan Amount and Purpose: Specifies the principal amount of the loan and its intended use

5. Interest: Details the interest rate, calculation method, and payment frequency

6. Repayment Terms: Specifies the repayment schedule, method of payment, and any early repayment provisions

7. Representations and Warranties: Standard declarations by the founder regarding their capacity to enter into the agreement and accuracy of provided information

8. Events of Default: Lists circumstances that would constitute a default under the agreement

9. Consequences of Default: Outlines the company's rights and remedies in case of default

10. General Provisions: Standard boilerplate clauses including notices, amendments, governing law, and jurisdiction

Optional Sections

1. Security: Include when the loan is secured by any assets or guarantees

2. Tax Provisions: Include detailed tax provisions when there are specific tax implications or withholding requirements

3. Set-off Rights: Include when the company wants the right to set off the loan against other payments due to the founder

4. Related Party Provisions: Include when specific corporate governance requirements apply due to the founder's position

5. Employment Link: Include when the loan is connected to the founder's employment terms or conditions

6. Subordination: Include when the loan needs to be subordinated to other company debt

7. Insurance: Include when insurance is required to cover the loan amount

Suggested Schedules

1. Repayment Schedule: Detailed schedule of repayment dates and amounts

2. Drawdown Conditions: List of conditions precedent to be satisfied before loan disbursement

3. Security Details: Details of any security or collateral provided for the loan

4. Form of Drawdown Notice: Template for requesting loan disbursement

5. Existing Indebtedness: List of founder's existing debts and financial obligations to the company

6. Related Agreements: List of related agreements that may affect the loan terms

Authors

Alex Denne

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

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Applicable Law
Board
Business Day
Company
Completion Date
Confidential Information
Default Interest Rate
Default Notice
Drawdown
Drawdown Date
Drawdown Notice
Encumbrance
Event of Default
Final Repayment Date
Financial Indebtedness
Founder
Group
HKD
Hong Kong
Interest Payment Date
Interest Period
Interest Rate
Loan
Loan Amount
Material Adverse Effect
Party/Parties
Permitted Purpose
Repayment Date
Repayment Schedule
Security
Security Documents
Signing Date
Subsidiary
Tax
Working Day
Relevant Industries

Technology

Financial Services

E-commerce

Healthcare

Manufacturing

Professional Services

Real Estate

Media and Entertainment

Retail

Education

Biotechnology

Software Development

Consulting

Relevant Teams

Legal

Finance

Corporate Secretarial

Compliance

Risk Management

Treasury

Corporate Governance

Board Secretariat

Executive Office

Relevant Roles

Chief Executive Officer

Company Director

Chief Financial Officer

Financial Controller

Company Secretary

Legal Counsel

Corporate Lawyer

Compliance Officer

Board Member

Managing Director

Finance Manager

Treasury Manager

Corporate Governance Officer

Risk Manager

Founder

Co-Founder

Industries
Companies Ordinance (Cap. 622): Governs company formation, operation, and corporate governance in Hong Kong, including requirements for directors' duties and corporate borrowing
Money Lenders Ordinance (Cap. 163): Regulates money lending transactions and sets requirements for interest rates, although typically exempted for company-to-company or intra-company loans
Contract and Rights of Third Parties Ordinance (Cap. 623): Provides the basic framework for contract formation and enforcement in Hong Kong
Interest Rate Ordinance (Cap. 49): Regulates maximum interest rates and calculations of interest in Hong Kong
Stamp Duty Ordinance (Cap. 117): Determines whether any stamp duty is payable on loan documentation, particularly relevant if the loan is secured by Hong Kong property
Employment Ordinance (Cap. 57): May be relevant if the founder is also an employee, as it governs employment relationships and could affect loan terms
Inland Revenue Ordinance (Cap. 112): Governs the tax treatment of loans and interest payments between related parties
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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