Shareholder Loan Note for Pakistan

Shareholder Loan Note Template for Pakistan

This document serves as a formal loan agreement between a shareholder and a company under Pakistani law, establishing the terms and conditions for the provision of debt financing. It encompasses key elements such as loan amount, interest/profit calculations, repayment terms, and security arrangements, while ensuring compliance with both Pakistani corporate law and, where applicable, Islamic finance principles. The document includes necessary provisions for enforcement under Pakistani jurisdiction and incorporates relevant requirements from the Companies Act 2017 and other applicable financial regulations.

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Shareholder Loan Note

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What is a Shareholder Loan Note?

The Shareholder Loan Note is a crucial financing instrument used in Pakistani corporate practice when a shareholder provides debt financing to a company. This document is typically employed when companies require additional funding beyond their existing capital structure, and shareholders are willing to provide such funding through debt rather than equity. The loan note outlines all essential terms including the principal amount, interest/profit rate, repayment schedule, and security arrangements. It must comply with Pakistani corporate law, particularly the Companies Act 2017, and may need to incorporate Islamic finance principles depending on the parties' requirements. The document is particularly important for maintaining clear separation between shareholder investments and loans, which has implications for tax treatment, corporate governance, and potential insolvency scenarios.

What sections should be included in a Shareholder Loan Note?

1. Parties: Identification of the Lender (Shareholder) and Borrower (Company)

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

3. Definitions: Key terms used throughout the document

4. Loan Amount and Purpose: Specification of the principal amount and intended use of funds

5. Interest Rate and Calculation: Details of interest rate (or profit rate for Islamic structure) and calculation methodology

6. Repayment Terms: Schedule and method of repayment, including any early repayment provisions

7. Security: Details of any security or collateral provided for the loan

8. Representations and Warranties: Standard company representations regarding capacity and authority

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

10. Events of Default: Circumstances constituting default and consequences

11. Remedies: Lender's rights and remedies upon default

12. Notices: Communication procedures between parties

13. Governing Law and Jurisdiction: Specification of Pakistani law and jurisdiction

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

1. Islamic Finance Provisions: Additional provisions for Shariah compliance if required

2. Subordination: Required if the loan needs to be subordinated to other company debt

3. Tax Provisions: Detailed tax treatment and withholding requirements if applicable

4. Currency Provisions: Required if loan is in foreign currency, addressing exchange rate risks

5. Assignment and Transfer: Include if the loan note should be transferable

6. Security Trustee: Required if security is held through a trustee structure

7. Guarantees: Include if personal or corporate guarantees are provided

What schedules should be included in a Shareholder Loan Note?

1. Repayment Schedule: Detailed amortization or payment schedule

2. Form of Draw Down Notice: Standard form for requesting loan disbursements

3. Conditions Precedent: List of documents and conditions required before drawdown

4. Security Documents: Forms of security documents and filing requirements

5. Calculation of Interest/Profit: Detailed methodology for calculating interest or profit

6. Corporate Authorizations: Required corporate approvals and resolutions

7. Shariah Structure: Details of Islamic finance structure if applicable

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

Pakistan

Publisher

Genie AI

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Banking & Financial Services

Manufacturing

Technology

Real Estate & Construction

Energy & Resources

Healthcare

Retail & Consumer

Agriculture

Telecommunications

Transportation & Logistics

Industrial Services

Professional Services

Relevant Teams

Legal

Finance

Corporate Finance

Treasury

Compliance

Risk Management

Corporate Secretarial

Board of Directors

Executive Management

Shareholder Relations

Relevant Roles

Chief Financial Officer

Finance Director

Corporate Lawyer

Legal Counsel

Company Secretary

Treasury Manager

Financial Controller

Investment Manager

Shareholder Relations Manager

Corporate Finance Manager

Risk Manager

Compliance Officer

Board Director

Managing Director

Chief Executive Officer

Industries
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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