Simple Intercompany Loan Agreement Template for England and Wales

When one company needs to lend money to, or borrow from, another company in the same corporate group, a properly structured intercompany loan agreement records the arrangement in writing. This template creates a formal framework for internal lending between a lender and a borrower while helping the group meet England and Wales company law requirements. It suits parent companies, subsidiaries and centralised treasury functions that move funds around the group and want a clear, signed record for each loan.

What is an intercompany loan agreement?

An intercompany loan agreement is a written contract between two group companies, one acting as lender and the other as borrower, that sets out how much is being lent, the interest rate, when and how the loan is repaid, and what happens on default. It can be secured against assets or left unsecured, depending on the group's needs. Because both companies are related parties, the agreement is the document auditors, banks and tax authorities look to when they need to see the loan on arm's length terms rather than an informal transfer of funds.

When do you need this document?

You need an intercompany loan agreement whenever companies within your group require a formal lending arrangement. This includes a parent company providing working capital to a subsidiary, a profitable group company lending to one that needs investment, or a central treasury distributing funds across the organisation. It is also useful when external auditors want documented evidence of intercompany transactions, when tax authorities need clear records of existing loan relationships for transfer pricing, or when you are preparing for refinancing, bank facilities or a sale that require transparent group arrangements.

What should the template include?

A simple intercompany loan agreement should cover the following core terms:

• The names of the lender and the borrower, and their group relationship.
• The loan amount (the principal) and how and when it is drawn down.
• The interest rate, or a statement that the loan is interest free, plus how interest is calculated.
• The repayment terms, including whether repayment is on demand, in instalments or on a fixed date.
• Whether the loan is secured or unsecured, and any security given.
• Default provisions setting out what happens if the borrower does not repay on time.
• Governing law and jurisdiction, here England and Wales.

Setting these out in one signed document means both parties know exactly what has been agreed. You can adapt the wording to your group's needs, and GenieAI can help draft, review and produce a ready-to-sign version. For related group arrangements, see our intercompany agreement templates.

Term loan or on-demand loan?

Two structures cover most group lending. A term loan runs for a fixed period, with the principal repaid on a set maturity date or through scheduled instalments, which suits a subsidiary funding a project with a known timeline. An on-demand loan lets the lender call for repayment at any time, which suits central treasury arrangements where cash moves around the group and the exact repayment date is not fixed at the outset. The template lets you set whichever term fits, and record the drawdown, interest and repayment dates so the commercial arrangement is unambiguous on the day both parties sign.

Is the loan secured or unsecured?

Many group loans are unsecured, meaning the lender relies on the borrower's general promise to repay rather than a charge over specific assets. An unsecured loan is quicker to put in place and common where the companies trust each other's financial position. A secured loan gives the lender a claim over assets if the borrower cannot repay, which can matter where the loan is large or where a bank or other finance provider is involved in the wider group. The template lets you record either approach and note any security so the position is clear from the moment both parties sign.

How this fits an intercompany loan policy

Groups that lend internally on a regular basis often set an intercompany loan policy so every arrangement follows the same rules on interest, approval limits and documentation. This template gives that policy a standard form to work from, so the first loan and the last loan in a series are recorded on consistent commercial terms rather than drafted from scratch each time. Where a full agreement is more than a given loan needs, some groups use a short facility letter that draws down under agreed master terms, though a signed agreement remains the clearest record for auditors and tax authorities.

Key legal considerations

To be enforceable and compliant, the agreement should address several areas. Interest rates should reflect arm's length pricing so the loan satisfies transfer pricing rules and avoids tax complications. Directors of each company must act within their duties, and you should confirm whether the transaction needs board approval or shareholder consent. The document should specify the governing law, the jurisdiction for any dispute, and appropriate representations about each company's capacity to enter the agreement. Recording all of this at the time the loan is made, rather than after the fact, keeps the arrangement clean for auditors and lenders.

Legal requirements in England and Wales

Under England and Wales law, an intercompany loan agreement should comply with the Companies Act 2006, particularly on directors' duties and substantial property transactions, and must not breach financial assistance prohibitions in holding company situations. It should sit within the Consumer Credit Act 1974 exemptions for business lending and avoid inadvertently creating a regulated activity under the Financial Services and Markets Act 2000. Corporation Tax Act 2009 provisions on loan relationships affect how interest is treated. Where the loan is secured, consider Companies House filing for charges (registering the charge on the company's charges register), and confirm proper corporate authorisation through board resolutions or your company's articles of association before the parties sign.