Intragroup Loan Agreement

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What is it?

An Intragroup Loan Agreement records the terms on which one party (the lender) lends money to another party (the borrower) which is within the same group of companies, e.g. from a parent company to a subsidiary or between two subsidiaries of the same parent company. This agreement is different from the Commercial Loan Agreement in that the Commercial Loan Agreement offers protections to the lender that this Intragroup Loan Agreement does not provide.

Why do you need it?

An Intragroup Loan Agreement is suitable for any group company member that wants to draft the basic terms of the arrangement in order to avoid any potential misunderstanding regarding the loan that may otherwise occur if there is no formal record beyond accounting entries.

One thing to notice about this agreement is that the loan is repayable on demand. An on-demand loan means that the lender may require repayment of the loan at any time. A borrowing subsidiary will not usually require certainty as to the term of the loan and the lender likewise can remove the need for having security, events of default, covenants, representations, and warranties as would be usual in a lending relationship between two unconnected parties.

Key clauses to watch for:

When drafting an Intragroup Loan Agreement, it is important to focus on a number of key clauses, in particular:

  • Calculation of interest; and
  • Details of the repayment plan.

Intragroup Loan Agreement Document

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