If you are a business owner with multiple companies, you may come across the need for an intercompany loan agreement. This is a document that outlines the terms of a loan made between two separate entities under the same ownership. If you are considering an intercompany loan, it is important to have a legal agreement in place to protect both parties. Here is a sample intercompany loan agreement to help guide you through the process.
Introduction
This intercompany loan agreement (the “Agreement”) is made between [Company A] and [Company B], both under common ownership and control of [Parent Company], with principal places of business at [Address]. This Agreement is made effective as of [Date].
Loan Amount
[Company A] agrees to lend to [Company B] the sum of [Loan Amount] (the “Loan”), which shall be used by [Company B] for business purposes only.
Loan Term
The Loan shall be due and payable on [Due Date]. If [Company B] fails to repay the Loan in full by the due date, [Company A] may, without notice, declare the entire balance of the Loan immediately due and payable.
Interest Rate
The Loan shall bear interest at a rate of [Interest Rate] per annum, calculated on a daily basis and compounded annually. Interest shall be payable on the due date of the Loan.
Security
The Loan shall be secured by [Security], which shall remain in the possession of [Company A] until the Loan is repaid in full.
Representations and Warranties
Both parties represent and warrant that they have full power and authority to enter into and perform this Agreement. [Company B] represents and warrants that it is not currently in default or breach of any other agreement with [Company A].
Default
If [Company B] fails to make any payment when due, breaches any other provision of this Agreement, or becomes insolvent, [Company A] may declare the Loan immediately due and payable.
Amendment and Waiver
This Agreement may be amended or waived only by a written instrument executed by both parties.
Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the state of [Governing Law].
Entire Agreement
This Agreement constitutes the entire agreement between the parties and supersedes all prior negotiations, understandings, and agreements.
Conclusion
An intercompany loan agreement is an important legal document to protect both parties involved in a loan between separate entities under the same ownership. This sample agreement can serve as a guide to help ensure that your intercompany loan is structured properly and with all necessary protections in place. As always, it is recommended that you consult with a legal professional to ensure that your specific needs are addressed.
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