Document background
The Shareholder Loan Agreement is a crucial financing instrument used when a company seeks funding from its existing shareholders rather than external sources. This document is particularly relevant in the Philippine context where companies often turn to shareholders for more flexible and potentially cost-effective financing options. It becomes necessary when a company requires additional capital for operations, expansion, or specific projects, and a shareholder is willing to provide this funding through a loan rather than equity investment. The agreement must comply with Philippine corporate law, banking regulations, and tax requirements, particularly the Corporation Code of the Philippines and relevant Central Bank regulations. It typically includes detailed terms about the loan amount, interest rates, repayment schedule, potential security arrangements, and default provisions. This type of agreement is especially useful for small to medium-sized enterprises in the Philippines where traditional bank financing might be less accessible or less desirable.
