Loan Note Document for the United Kingdom

Loan Note Document Template for England and Wales

A Loan Note Document is a formal legal instrument governed by English and Welsh law that evidences a debt obligation between an issuer and noteholder(s). It sets out the terms of borrowing, including principal amount, interest rate, repayment terms, and any security arrangements. The document includes provisions for events of default, transferability of the notes, and may include conversion rights in certain cases. It's commonly used for corporate financing and investment structures in the United Kingdom.

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What is a Loan Note Document?

A Loan Note Document is widely used in corporate financing scenarios where companies seek to raise capital through debt instruments. This document type is particularly relevant under English and Welsh law for both private and institutional lending arrangements. The Loan Note Document provides a comprehensive framework for the debt relationship, detailing crucial elements such as interest calculations, repayment schedules, security arrangements, and noteholder rights. It's especially useful for companies seeking alternative financing options to traditional bank loans or when structuring complex investment arrangements.

What sections should be included in a Loan Note Document?

1. Parties: Identifies the issuer and noteholder(s)

2. Background: Context of the loan note issuance

3. Definitions: Key terms used throughout the document

4. Principal Amount and Issue: Details of the loan amount and issuance terms

5. Interest: Interest rate, calculation method, and payment dates

6. Repayment Terms: Conditions and timing of principal repayment

7. Events of Default: Circumstances triggering default

8. Transferability: Terms governing transfer of the notes

What sections are optional to include in a Loan Note Document?

1. Security: Details of any security provided - include when the loan note is secured

2. Conversion Rights: Terms for converting notes to shares - include for convertible loan notes

3. Subordination: Priority ranking of the loan note - include when there are multiple creditors

4. Warranties: Issuer's warranties - include for more complex arrangements

What schedules should be included in a Loan Note Document?

1. Form of Transfer: Template for transferring the note

2. Form of Note Certificate: Template of the physical note certificate

3. Security Documents: Details of any security arrangements

4. Conversion Mechanics: Detailed procedures for conversion

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Genie AI

Document Type

Promissory Note

Sector

Banking

Cost

Free to use
Relevant legal definitions
Clauses
Industries

Companies Act 2006: Primary legislation governing company operations, particularly relevant for the creation and registration of charges related to loan notes

Financial Services and Markets Act 2000: Core financial services legislation that regulates financial activities and financial instruments in the UK

Consumer Credit Act 1974: Legislation governing consumer credit and relevant if loan notes involve individual investors

Law of Property Act 1925: Fundamental property law legislation, relevant when loan notes involve security over property

FSMA Regulated Activities Order 2001: Specifies which activities require FCA authorization and regulates financial instruments including loan notes

FCA Regulations: Regulatory framework governing financial services, particularly relevant if loan notes are considered transferable securities

Prospectus Regulation Rules: Rules governing the requirements for prospectuses when offering securities to the public

Insolvency Act 1986: Legislation governing insolvency proceedings and creditor rights

Enterprise Act 2002: Legislation affecting corporate insolvency and enforcement of security

Companies Registration of Charges Regulations 2009: Regulations governing the registration of security interests created by companies

Income Tax Act 2007: Tax legislation relevant for interest payments and taxation of loan note returns

Corporation Tax Act 2009: Tax legislation governing corporate aspects of loan notes including deductibility of interest

Taxation of Chargeable Gains Act 1992: Legislation governing taxation of gains from disposal of loan notes

Money Laundering Regulations 2017: Anti-money laundering requirements affecting financial instruments and transactions

Unfair Contract Terms Act 1977: Legislation controlling the use of unfair terms in contracts

Misrepresentation Act 1967: Legislation governing false or misleading statements made during contract formation

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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