The Founder Loan Agreement is a crucial document used when a company founder requires financial assistance from their company or when the company needs to formalize existing financial arrangements with its founders. This agreement, governed by South African law, must comply with the Companies Act 71 of 2008, particularly regarding financial assistance to directors and related parties. The document becomes necessary during various stages of company growth, including startup funding gaps, expansion phases, or personal financial needs of founders. It typically includes detailed terms about the loan amount, interest rates, repayment schedule, security arrangements, and potential conversion rights, while ensuring proper corporate governance and shareholder protections are maintained. The agreement must also address tax implications and may require special approvals under South African corporate law.
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1. Parties: Identification of the lender and the founder-borrower, including their full details and capacity in which they are contracting
2. Background: Context of the loan, relationship between parties, and purpose of the agreement
3. Definitions: Definitions of key terms used throughout the agreement
4. Loan Amount and Purpose: Specification of the loan amount and its intended use
5. Interest: Interest rate, calculation method, and payment terms
6. Repayment Terms: Repayment schedule, method, and conditions
7. Security: Details of any security or collateral provided for the loan
8. Representations and Warranties: Statements of fact and assurances given by the founder-borrower
9. Covenants: Ongoing obligations of the founder-borrower during the loan term
10. Events of Default: Circumstances constituting default and consequences
11. Termination: Conditions and process for terminating the agreement
12. General Provisions: Standard legal clauses including notices, governing law, and jurisdiction
1. Conversion Rights: Terms for converting the loan into equity, if applicable
2. Board Approval: Required when company board approval is needed under Section 45 of the Companies Act
3. Exchange Control Provisions: Required for cross-border loans or foreign founders
4. Tax Gross-up: Provisions for tax implications and withholding tax requirements
5. Subordination: Required when the loan needs to be subordinated to other company debt
6. Company Guarantees: When additional company guarantees are provided for the loan
7. Early Repayment: Terms for early repayment options and any associated penalties
1. Repayment Schedule: Detailed schedule of repayment dates and amounts
2. Loan Disbursement Schedule: If the loan is to be disbursed in tranches, details of timing and conditions
3. Security Details: Detailed description of any security or collateral provided
4. Company Resolution: Copy of company resolution approving the loan
5. Conversion Terms: Detailed terms and calculations for loan conversion if applicable
6. Related Party Confirmations: Required declarations and confirmations under Companies Act Section 45
Relevant legal definitions
Agreement
Advance
Applicable Laws
Board
Business Day
Companies Act
Company
Confidential Information
Default Interest Rate
Disbursement Date
Effective Date
Event of Default
Financial Year
Founder
Interest Payment Date
Interest Rate
Loan
Loan Amount
Material Adverse Effect
Parties
Prime Rate
Repayment Date
Repayment Schedule
Security
Security Documents
Signature Date
South African Reserve Bank
Special Resolution
Tax
Term
VAT
ZAR
Conversion Rights
Conversion Price
Shareholder Approval
Board Resolution
Company Secretary
Encumbrance
Financial Indebtedness
Related Party
Subordination
Advance
Applicable Laws
Board
Business Day
Companies Act
Company
Confidential Information
Default Interest Rate
Disbursement Date
Effective Date
Event of Default
Financial Year
Founder
Interest Payment Date
Interest Rate
Loan
Loan Amount
Material Adverse Effect
Parties
Prime Rate
Repayment Date
Repayment Schedule
Security
Security Documents
Signature Date
South African Reserve Bank
Special Resolution
Tax
Term
VAT
ZAR
Conversion Rights
Conversion Price
Shareholder Approval
Board Resolution
Company Secretary
Encumbrance
Financial Indebtedness
Related Party
Subordination
Clauses
Loan Amount
Interest Rate
Repayment Terms
Security
Representations and Warranties
Covenants
Default
Termination
Acceleration
Assignment
Confidentiality
Non-Competition
Board Approval
Shareholder Approval
Tax Compliance
Exchange Control
Force Majeure
Notices
Dispute Resolution
Governing Law
Jurisdiction
Severability
Entire Agreement
Amendment
Waiver
Costs
Good Faith
Further Assurance
Counterparts
Conversion Rights
Subordination
Related Party Transactions
Company Guarantees
Early Repayment
Information Rights
Interest Rate
Repayment Terms
Security
Representations and Warranties
Covenants
Default
Termination
Acceleration
Assignment
Confidentiality
Non-Competition
Board Approval
Shareholder Approval
Tax Compliance
Exchange Control
Force Majeure
Notices
Dispute Resolution
Governing Law
Jurisdiction
Severability
Entire Agreement
Amendment
Waiver
Costs
Good Faith
Further Assurance
Counterparts
Conversion Rights
Subordination
Related Party Transactions
Company Guarantees
Early Repayment
Information Rights
Relevant Industries
Technology
Start-ups
Financial Services
Professional Services
Manufacturing
Retail
E-commerce
Healthcare
Education
Real Estate
Mining
Agriculture
Renewable Energy
Media and Entertainment
Construction
Relevant Teams
Legal
Finance
Compliance
Corporate Governance
Treasury
Risk Management
Board of Directors
Executive Leadership
Company Secretariat
Relevant Roles
Chief Executive Officer
Chief Financial Officer
Company Secretary
Legal Counsel
Corporate Lawyer
Financial Director
Managing Director
Board Director
Compliance Officer
Financial Manager
Company Founder
Executive Director
Corporate Governance Officer
Treasury Manager
Risk Manager
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