Inter Company Loan Agreement Template for the United States

An Inter Company Loan Agreement is a legally binding contract that governs lending arrangements between companies within the same corporate group or family of businesses. Under United States law, this document ensures that financial transactions between affiliated entities comply with federal tax regulations, securities laws, and corporate governance requirements. You need this agreement to formalize any lending relationship between related companies while protecting both parties and maintaining regulatory compliance.

When do you need this document?

You should use an Inter Company Loan Agreement when your parent company needs to provide working capital to a subsidiary, when a profitable subsidiary lends funds to support another division's expansion, or when companies within your corporate group require formal documentation for cash management purposes. This agreement becomes essential during mergers and acquisitions when temporary financing arrangements are needed between the acquiring and target companies. You also need this document when your public company must comply with Sarbanes-Oxley disclosure requirements for related party transactions, or when external auditors require formal documentation of intercompany financial arrangements. Additionally, if your companies operate across different states, this agreement helps navigate varying state usury laws and ensures consistent terms.

Key legal considerations

The most critical aspect of your Inter Company Loan Agreement is establishing arm's length terms that comply with IRS transfer pricing regulations under Section 482. You must set interest rates that reflect what unrelated parties would agree to in similar circumstances, as below-market loans can trigger imputed income under IRC Section 7872. Your agreement should include clear representations and warranties from both companies regarding their authority to enter the transaction and their financial capacity to fulfill obligations. Consider including acceleration clauses that allow the lender to demand immediate repayment upon certain trigger events, such as covenant breaches or changes in ownership. You should also address subordination provisions if the borrowing company has other debt obligations, and include specific language regarding how the loan will be treated for accounting and tax purposes.

Legal requirements in United States

Under United States law, your Inter Company Loan Agreement must comply with federal securities regulations if either company is publicly traded, particularly regarding disclosure requirements under the Securities Exchange Act of 1934. The Dodd-Frank Act may impose additional compliance obligations depending on the size and nature of your companies. You must ensure the agreement satisfies state-specific usury laws, which vary significantly across jurisdictions and may cap maximum interest rates. Corporate governance requirements under state law typically require board resolutions or shareholder approval for significant intercompany transactions. If your companies operate internationally, you may need to consider additional reporting requirements under the Foreign Account Tax Compliance Act (FATCA) and ensure compliance with anti-money laundering regulations. The Uniform Commercial Code, as adopted by individual states, may also govern certain aspects of your loan agreement, particularly regarding security interests and default procedures.