Question 1

What is a Shareholder Loan Agreement?

Accepted Answer

A Shareholder Loan Agreement is a contract documenting a loan made by a shareholder to their company. Unlike equity investment, shareholder loans create a debtor-creditor relationship, allowing the shareholder to receive repayment with interest while the company gains access to capital without diluting ownership.

Question 2

Is this template compliant with South African law?

Accepted Answer

Yes, this template complies with South African company law and the Companies Act. It addresses the specific considerations relevant to related-party transactions between shareholders and their companies, including proper documentation for tax and accounting purposes.

Question 3

Can I customize this template?

Accepted Answer

Absolutely. The template includes a customization table allowing you to specify the loan amount, interest rate, repayment schedule, subordination terms, and conversion rights if applicable. All provisions can be tailored to your specific shareholder-company arrangement.

Question 4

What key clauses are included in the template?

Accepted Answer

The template covers: loan amount and release conditions; interest rate and calculation method; repayment schedule and terms; payment covenants; events of default and remedies; subordination provisions; certificate of indebtedness; and representations by the company.

Question 5

Who should use this template?

Accepted Answer

This template is ideal for shareholders who wish to provide funding to their company as a loan rather than additional equity. It's commonly used by founders, investors, and directors who want to inject capital while maintaining the ability to receive repayment with priority over dividends.

Question 6

What format is the template delivered in?

Accepted Answer

The template is delivered in Microsoft Word format (.docx), enabling full customization of all terms and provisions before execution by the shareholder and company.

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Template Shareholders LoanAgreement