An Internal Loan Agreement is essential for documenting and formalizing financial arrangements between related entities within a corporate group in Hong Kong. This document is typically used when one group entity provides funding to another, whether for working capital, expansion projects, or other corporate purposes. The agreement must comply with Hong Kong's legal framework, including the Companies Ordinance, tax regulations, and financial reporting requirements. It should include comprehensive terms covering loan amount, interest, repayment, security (if any), and default provisions. The Internal Loan Agreement serves multiple purposes: it creates legal certainty, supports tax compliance, aids in financial reporting, and demonstrates proper corporate governance. It's particularly important in Hong Kong where regulators expect clear documentation of related-party transactions and transfer pricing arrangements.

1. Parties: Identification of the lender and borrower entities, including their company registration details and registered addresses

2. Background: Context of the internal loan, relationship between the parties, and purpose of the loan

3. Definitions and Interpretation: Definitions of key terms used in the agreement and rules of interpretation

4. Loan Amount and Purpose: Specification of the loan amount, currency, and permitted use of funds

5. Interest: Interest rate, calculation method, payment frequency, and default interest provisions

6. Drawdown: Conditions and procedures for drawing down the loan

7. Repayment: Repayment schedule, prepayment provisions, and payment mechanics

8. Representations and Warranties: Standard representations by borrower regarding its status, capacity, and authority

9. Covenants: Ongoing obligations of the borrower during the loan term

10. Events of Default: Circumstances constituting default and consequences thereof

11. Taxes: Treatment of taxes, including withholding tax obligations

12. Notices: Communication procedures between parties

13. Governing Law and Jurisdiction: Specification of Hong Kong law as governing law and jurisdiction for disputes

14. Execution: Signature blocks and execution formalities