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Companies Act 2014 - Directors Loans


The Companies Act 2014 introduces key changes in relation to loans between companies and Directors or Connected Persons. These must now be documented in writing in clear and unambiguous terms. This requirement applies to existing loans in existence at the commencement of the Act as well as new loans arising after the commencement of the Act.

Loan from Company
If the loan is not reduced to writing in clear terms, it will be presumed that it is repayable on demand and bears interest at an appropriate rate unless the director can prove otherwise.   


Loan to Company
Undocumented loans from a director or connected person to the company will be presumed that it is not a loan and is not repayable. If the director can successfully prove that it is in fact a loan, there is a further presumption that the loan is unsecured, bears no interest and is subordinate to all other debts of the company. 
Summary Approval Procedure 

A summary approval procedure allows for loans to Directors to be legalised in certain circumstances where they would otherwise be prohibited. Agreement by 75% or more of shareholders is required and a declaration setting out certain information must be filed in the CRO within 21 days of the loan being made.


Directors and Connected Persons should therefore ensure that they document these transactions with a Company.




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