Data, property, finance and security instruments · 03
Loan agreement, including director and shareholder loans
Lends money on terms that are enforceable — which two statutes can quietly prevent.
Lends money on terms that are enforceable — which two statutes can quietly prevent.
The capital and the drawdown mechanism; interest and how it is calculated; the repayment schedule; events of default and acceleration; security; subordination where a solvency test depends on it; and the certificate-of-indebtedness clause.
Two traps. The National Credit Act can apply to a loan to a small juristic person, and an unregistered credit provider’s agreement is unlawful and void — check the borrower’s asset value and turnover against the threshold, and whether the loan is a large agreement, before assuming exemption. Separately, a loan by a company to a director or a person related to a director requires the board resolution and the notice regime in section 45 of the Companies Act, failing which the resolution is void and the directors are personally liable.
The law it sits under
What governs this instrument.
The National Credit Act 34 of 2005 applies to a credit agreement by its substance, not its label. Where it applies, the lender may need to be registered as a credit provider, and an agreement entered into by an unregistered credit provider who was required to register is unlawful and void under section 89. Whether a particular facility falls inside the Act is the first question, not the last.
Related pages, tools and documents
Where this instrument sits in the wider set, and the engagement that produces it.
Start here
Tell us the decision your organisation needs to make.
The first conversation is thirty minutes, confidential and free. You will leave it knowing which of our services you need and which you do not.