Document background
The Loan Agreement Between Parent Company And Subsidiary is a crucial document used when a parent company provides financing to its subsidiary in Canada. This agreement is essential for documenting intra-group lending arrangements while ensuring compliance with Canadian corporate law, tax regulations, and transfer pricing rules. It's particularly important for establishing clear terms of lending, maintaining proper corporate governance, and creating a legally enforceable obligation between related entities. The agreement must address specific Canadian regulatory requirements, including those under the Canada Business Corporations Act and relevant provincial legislation. It typically includes detailed provisions for loan amount, interest calculation (considering arm's length principles), repayment terms, security arrangements (if any), and default provisions, while acknowledging the special relationship between the parties. This document is fundamental for corporate groups managing internal financing structures and must be carefully drafted to withstand regulatory scrutiny.
