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Corporation Loan To Shareholder Agreement

Corporation Loan To Shareholder Agreement Template for India

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Corporation Loan To Shareholder Agreement

"I need a Corporation Loan to Shareholder Agreement for a secured loan of INR 50 lakhs to a 15% stakeholder, with quarterly repayment over 3 years starting March 2025, including personal property as collateral."

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Document background
The Corporation Loan To Shareholder Agreement is a critical document used when a company registered in India extends a loan to one of its shareholders. This arrangement must comply with various Indian regulatory requirements, particularly Sections 179, 180, and 185 of the Companies Act 2013, along with applicable RBI guidelines and tax regulations. The document is essential for establishing clear terms of lending, including interest rates, repayment schedules, and security arrangements, while ensuring transparency in related party transactions. It's particularly important for maintaining proper corporate governance and protecting the interests of other shareholders and stakeholders. The agreement includes comprehensive details about the loan facility, representations and warranties, events of default, and remedy mechanisms, all structured within the framework of Indian corporate and financial laws.
Suggested Sections

1. Parties: Identification of the Corporation (Lender) and the Shareholder (Borrower), including registration details and addresses

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

3. Definitions: Definitions of key terms used throughout the agreement

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

5. Interest Rate and Calculation: Details of interest rate, calculation method, and payment frequency

6. Repayment Terms: Schedule of repayment, including principal and interest payment dates

7. Security and Collateral: Details of any security or collateral provided against the loan

8. Representations and Warranties: Standard declarations by both parties regarding their capacity and authority

9. Events of Default: Circumstances constituting default and consequences thereof

10. Rights and Obligations: Specific rights and obligations of both the corporation and shareholder

11. Governing Law and Jurisdiction: Specification of Indian law as governing law and jurisdiction for disputes

12. Notices: Process and addresses for serving notices under the agreement

13. Boilerplate Clauses: Standard clauses including severability, entire agreement, and amendments

Optional Sections

1. Guarantees: Required when additional guarantees are provided by third parties

2. Prepayment Provisions: Include when early repayment options are to be provided

3. Tax Provisions: Detailed section needed when specific tax implications need to be addressed

4. Insurance Requirements: Include when insurance of collateral or life insurance is required

5. Change in Shareholding: Include when loan terms are linked to minimum shareholding requirements

6. Board Approval: Required for listed companies or when loan amount exceeds certain thresholds

7. Subordination: Include when loan needs to be subordinated to other corporate debts

Suggested Schedules

1. Schedule 1 - Loan Details: Detailed breakdown of loan amount, interest calculations, and repayment schedule

2. Schedule 2 - Security Details: Detailed description of any security or collateral provided

3. Schedule 3 - Shareholding Pattern: Current shareholding details of the borrower in the corporation

4. Schedule 4 - Board Resolution: Copy of board resolution approving the loan

5. Schedule 5 - KYC Documents: Copies of required KYC documents of the shareholder

6. Appendix A - Repayment Schedule: Detailed amortization schedule showing principal and interest payments

7. Appendix B - Form of Notices: Standard formats for various notices under the agreement

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 of Directors
Business Day
Companies Act
Confidential Information
Default Interest
Default Notice
Drawdown Date
Effective Date
Encumbrance
Event of Default
Financial Year
Government Authority
Interest Payment Date
Interest Period
Interest Rate
Lender
Loan
Loan Amount
Material Adverse Effect
Maturity Date
Outstanding Amount
Parties
Payment Date
Prepayment
Principal Amount
RBI
Repayment Schedule
Security
Security Documents
Shareholder
Shareholding
Tax
Term
Transaction Documents
Relevant Industries

Banking & Financial Services

Manufacturing

Information Technology

Real Estate

Healthcare

Retail

Infrastructure

Energy

Telecommunications

Professional Services

Mining & Resources

Agriculture

Entertainment & Media

Relevant Teams

Legal

Finance

Corporate Secretarial

Treasury

Compliance

Risk Management

Corporate Governance

Board Secretariat

Shareholder Relations

Accounts

Relevant Roles

Chief Financial Officer

Corporate Counsel

Company Secretary

Finance Director

Legal Director

Compliance Officer

Treasury Manager

Financial Controller

Managing Director

Board Director

Shareholder Relations Manager

Corporate Governance Officer

Risk Management Officer

Accounts Manager

Legal Counsel

Industries
Companies Act, 2013: Primary legislation governing corporate operations in India. Sections 179 and 180 specifically deal with the board's power to borrow. Section 185 specifically regulates loans to directors and related parties.
Income Tax Act, 1961: Governs the tax implications of loans between companies and shareholders. Section 2(22)(e) particularly deals with deemed dividend provisions for loans to shareholders.
Indian Contract Act, 1872: Provides the basic framework for all contracts in India, including aspects like offer, acceptance, consideration, and enforceability of loan agreements.
Reserve Bank of India Act, 1934: Contains regulations regarding financial transactions and lending activities, including guidelines on interest rates and loan terms.
Securities and Exchange Board of India Act, 1992: Relevant for listed companies, governing disclosure requirements and shareholder rights in relation to significant transactions with the company.
Transfer of Property Act, 1882: Relevant for any security or collateral provisions in the loan agreement, especially if immovable property is involved as security.
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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