The Founder Loan Agreement is a crucial document used when a company registered in Hong Kong extends a loan to one of its founders. This arrangement typically occurs during company growth phases, when founders need additional funding but prefer not to dilute their equity or seek external financing. The agreement must comply with Hong Kong's Companies Ordinance, particularly regarding related party transactions and directors' duties. It includes detailed terms covering the loan amount, interest calculations, repayment schedule, default provisions, and any security arrangements. The document also addresses the complex relationship between the founder's roles as both borrower and company stakeholder, ensuring proper corporate governance and transparency in accordance with Hong Kong law.
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1. Parties: Identifies the founder as borrower and the company as lender, including their full legal names and addresses
2. Background: Sets out the context of the loan, including the founder's relationship with the company and the purpose of the loan
3. Definitions: Defines key terms used throughout the agreement
4. Loan Amount and Purpose: Specifies the principal amount of the loan and its intended use
5. Interest: Details the interest rate, calculation method, and payment frequency
6. Repayment Terms: Specifies the repayment schedule, method of payment, and any early repayment provisions
7. Representations and Warranties: Standard declarations by the founder regarding their capacity to enter into the agreement and accuracy of provided information
8. Events of Default: Lists circumstances that would constitute a default under the agreement
9. Consequences of Default: Outlines the company's rights and remedies in case of default
10. General Provisions: Standard boilerplate clauses including notices, amendments, governing law, and jurisdiction
1. Security: Include when the loan is secured by any assets or guarantees
2. Tax Provisions: Include detailed tax provisions when there are specific tax implications or withholding requirements
3. Set-off Rights: Include when the company wants the right to set off the loan against other payments due to the founder
4. Related Party Provisions: Include when specific corporate governance requirements apply due to the founder's position
5. Employment Link: Include when the loan is connected to the founder's employment terms or conditions
6. Subordination: Include when the loan needs to be subordinated to other company debt
7. Insurance: Include when insurance is required to cover the loan amount
1. Repayment Schedule: Detailed schedule of repayment dates and amounts
2. Drawdown Conditions: List of conditions precedent to be satisfied before loan disbursement
3. Security Details: Details of any security or collateral provided for the loan
4. Form of Drawdown Notice: Template for requesting loan disbursement
5. Existing Indebtedness: List of founder's existing debts and financial obligations to the company
6. Related Agreements: List of related agreements that may affect the loan terms
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