Directors Loan Agreement to Ltd Co

[dhirenmakhecha_gmail_com]

Hi everyone, would appreciate some advice / resources please. My accountant has categorised my Directors Loans to my Limited Company as short term debt, and as a result I’ve had mortgage fall through! 

My accountant has informed me that I need a Directors Loan agreement to classify my loans as longer term loans. 

Could anyone either direct me to, or alternatively share a template for such an agreement?

Thanks a million,

Darren

 

[Kerry Chan]

Hi, Darren.

Your account is right to categorise your director's loans as short-term debt, in the absence of a definitive repayment date.  In many ways, that's the point of a director's loan, it is intended to be a flexible arrangement for small companies.

It is not clear to me why your mortgage fell through because of director's loans - it seems slightly odd to me (though I appreciate there isn't much information about your circumstances stated).

However, given what you mentioned, I wonder if the lender is looking for is a subordination agreement instead, so that your company cannot repay your director's loans (or at least a certain portion of it) before you repay the lender in full.  It may be worth clarifying with the lender about what they need first?

If your lender indeed requires a subordination agreement, the lender is likely to require a legal opinion about the subordination agreement.

In any event, if you still require a director's loan agreement or a subordination agreement (if no legal opinion is required), please get in touch.

For the avoidance of doubt, the above (a) does not constitute legal advice (and no lawyer-client relationship is formed in any way) and (b) is set out for your reference only.

Kerry