Board Resolution For Taking Loan From Shareholder Template for England and Wales

It's the formal written record of the directors' decision to accept a loan from one of the company's shareholders. It confirms the board has reviewed the loan terms, addressed any conflicts of interest where the shareholder is also a director, and authorised the execution of the loan agreement and any related security documentation.

Board approval alone is usually sufficient for a private company to take a shareholder loan, provided no conflict of interest provisions in the Articles require shareholder consent. However, if the lending shareholder is also a director, the conflict must be declared and the board must consider whether the Articles require the interested director to be excluded from the vote.

Under UK transfer pricing rules in the Taxation (International and Other Provisions) Act 2010, loans between connected parties must be on arm's length terms. If the rate differs materially from what an unconnected lender would charge, HMRC may adjust the company's tax position. The board resolution should confirm the rate was reviewed against comparable market rates.

Only if the loan is secured by a charge over company assets. An unsecured shareholder loan does not require registration. However, if the shareholder takes a debenture or charge as security, it must be registered within 21 days using form MR01. An unregistered charge is void against other creditors and any liquidator, meaning the shareholder loses priority.

Interest paid on the shareholder loan is generally deductible against the company's corporation tax liability under the loan relationships rules in the Corporation Tax Act 2009. For the shareholder, interest received is taxable income. If the lending shareholder is an individual who borrowed funds to lend on, they may be able to claim a deduction under Income Tax Act 2007 Chapter 6 if the purpose qualifies.

Yes, this is a common structure, particularly in early-stage companies. A convertible shareholder loan can be converted into shares on agreed trigger events, such as a future fundraising round. The board resolution should confirm the conversion mechanics and note that the required shareholder authority to allot shares exists or will be obtained before conversion.

A director-shareholder lending money to the company has a personal financial interest and must declare it under section 177 of the Companies Act 2006 before or at the board meeting. Depending on the Articles, the interested director may be excluded from voting on the resolution. The declaration and exclusion should be recorded in the minutes.

In an insolvency, an unsecured shareholder loan ranks pari passu with other unsecured creditors unless it is subordinated by a deed of subordination. If the shareholder is also a shadow director, the loan may rank below external creditors. Repayments made in the period before insolvency may be challenged as preferences under section 340 of the Insolvency Act 1986.