Directors Loan Agreement
Companies can lend to their directors without the agreement of their shareholders, provided that the total value of the loan (loans) is less than £10,000. Otherwise, there are strict legal criteria for granting loans to directors. You must keep a record of any money you borrow from the company or deposit into the business – this record is normally referred to as a “director`s loan account”. Shareholder approval (usually by ordinary decision) is only required for directors` loans over £10,000 (the limit is £50,000 if the loan is intended to cover expenses related to the business`s activities). But in all situations where a company lends money to a manager, we recommend that a written agreement be established with the main conditions. Apart from everything else, it will help prove the existence of a loan that HMRC is applying for. I`ve been investing through a limited liability company for three years now and you don`t really need a written management agreement if you/your partner own the limited liability company 100%. However, for a joint venture, it may be useful to formalize the agreement perhaps. Although the characteristics of the loan are not totally contrary to those mentioned above, the LMA agreement can be used as the basis of the credit documentation, subject to changes. For example, in common law countries, particularly in less developed countries, the LMA is used as the basis for many Developing Country Agreements. Please note that there are three versions of the LMA contract: fixed-term and revolving credit agreements, revolving credit agreements and fixed-term credit agreements. .