Intercompany Loan Agreement Template for the Philippines

An Intercompany Loan Agreement is a legal contract that governs financial lending between companies within the same corporate group or between related entities. Under Philippine law, this document ensures compliance with the Civil Code, Corporation Code, and relevant tax regulations while protecting the interests of both lending and borrowing companies.

When do you need this document?

You need an Intercompany Loan Agreement when your parent company provides financing to a subsidiary, when sister companies engage in cross-lending arrangements, or when holding companies advance funds for working capital needs. This document is essential for multinational corporations with Philippine subsidiaries requiring capital injection, local companies expanding through intercompany financing, and corporate groups restructuring their financial arrangements. The agreement becomes particularly important when dealing with significant loan amounts that could impact corporate governance or when regulatory authorities require documented proof of legitimate business transactions.

Key legal considerations

Several critical legal elements must be addressed in your Intercompany Loan Agreement. The interest rate must comply with usury laws and reflect arm's length pricing to satisfy transfer pricing regulations under the National Internal Revenue Code. Board resolutions from both companies are typically required to authorize the loan transaction, ensuring proper corporate governance under the Corporation Code. The agreement should specify clear repayment terms, default provisions, and security arrangements if applicable. Additionally, you must consider withholding tax obligations on interest payments and ensure the loan serves legitimate business purposes rather than profit-shifting arrangements that could attract regulatory scrutiny.

Legal requirements in Philippines

Philippine law imposes specific requirements for intercompany loan agreements. Under Republic Act No. 11232 (Revised Corporation Code), related party transactions must be approved by the board of directors and disclosed appropriately. The Civil Code requires clear loan terms, including principal amount, interest rate, and repayment schedule. Tax compliance under the National Internal Revenue Code mandates proper documentation for transfer pricing purposes and withholding tax obligations. If either company is publicly listed, Securities Regulation Code provisions on related party transactions apply, requiring additional disclosure and approval procedures. BSP Circular No. 914 may apply if foreign exchange considerations are involved. The agreement must be properly executed with corporate secretary certification and authorized signatories to ensure enforceability under Philippine courts.