The Loan Agreement Shareholder To Company is a crucial document used when a company seeks financing from its existing shareholders rather than external sources. This arrangement is common in Indian businesses, particularly in startup and growth phases, or when conventional financing might be less advantageous. The agreement must comply with Indian corporate law, including the Companies Act 2013, and address related party transaction requirements. It typically includes detailed terms about the loan amount, interest rates, repayment schedule, default provisions, and any security arrangements. The document is particularly important for maintaining transparency in related party transactions and protecting both the lending shareholder's and company's interests while ensuring regulatory compliance.
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1. Parties: Identifies the shareholder lender and the borrowing company, including their legal details and registered addresses
2. Background: Explains the context of the loan, the relationship between the parties, and the company's need for funding
3. Definitions: Defines key terms used throughout the agreement for clarity and legal certainty
4. Loan Amount and Purpose: Specifies the loan amount and its intended use by the company
5. Interest Rate and Calculation: Details the applicable interest rate, calculation method, and payment frequency
6. Drawdown: Specifies the conditions and process for disbursement of the loan amount
7. Repayment Terms: Outlines the repayment schedule, including principal and interest payment dates
8. Representations and Warranties: Standard declarations by both parties about their capacity and authority to enter into the agreement
9. Company's Covenants: Ongoing obligations of the company during the loan period
10. Events of Default: Lists circumstances that constitute default and their consequences
11. Remedies: Specifies the lender's rights and remedies in case of default
12. Notices: Specifies how formal communications between parties should be made
13. Governing Law and Jurisdiction: Establishes Indian law as governing law and specifies jurisdiction for disputes
14. Counterparts: Allows the agreement to be executed in multiple copies
1. Security: Include when the loan is secured against company assets or guarantees
2. Subordination: Include when the shareholder loan needs to be subordinated to other company debts
3. Conversion Rights: Include if the loan can be converted into equity shares
4. Board Approval: Include specific section when company's articles require special board approval process
5. Prepayment Terms: Include when early repayment is allowed with specific terms
6. Tax Provisions: Include detailed tax clauses when complex tax implications exist
7. Assignment and Transfer: Include when either party may need to transfer their rights under the agreement
8. Force Majeure: Include when specific events beyond parties' control should be addressed
1. Repayment Schedule: Detailed schedule of repayment dates and amounts
2. Drawdown Notice Format: Template for the company to request loan disbursement
3. Company Board Resolution: Copy of board resolution approving the loan
4. Shareholder KYC Documents: Required identification and verification documents of the lending shareholder
5. Security Details: If applicable, detailed description of any security or collateral
6. Company Financial Statements: Recent financial statements of the company
7. Related Party Transaction Compliance: Documentation showing compliance with related party transaction requirements
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