An Intercompany Loan Agreement is a fundamental financial instrument that ensures a transparent and legally binding lending and borrowing relationship between affiliated companies. In the context of a holding company and its subsidiary in India, this Agreement serves as a cornerstone for financial operations, growth, and responsible financial management. It is essential for companies to draft, understand, and adhere to such agreements to promote financial prosperity and regulatory compliance.
Format of Intercompany Loan Agreement – Open Agreement for Holding and Subsidiary Company
INTERCOMPANY LOAN AGREEMENT
This Intercompany Loan Agreement (this “Agreement”) is made on the Date…… by and among:
Company Name, a company incorporated under the Companies Act, 2013, and having its registered office at Address….., India (hereinafter referred to as the “Borrower“, which expression shall, unless it be repugnant to the subject or context thereof, include its successors and permitted assigns and), of the FIRST PART
WITH
Company Name, a company incorporated under the provisions of the Companies Act, 1956 and having its registered office Address….., India (hereinafter referred to as “Lender” which expression shall, unless repugnant to the context or meaning thereof, be deemed to mean and include its successors and permitted assigns) of the SECOND PART;
The Lender and the Borrower are collectively hereinafter referred to as the “Parties” and individually as a “Party.”
WHEREAS
The Borrower is the wholly owned subsidiary company of the Lender.
WHEREAS, Lender and Borrower desire to establish an intercompany loan arrangement, as described below, to provide for working capital and for any other purpose deemed necessary by Lender and Borrower.
The Borrower a newly established company with small capital, Holding company decided to provide finance to subsidiary company for meeting the funding requirements and for kick start for the Borrower Company for their better future growth.
Borrower company deals in Investments and Investments related services in India and the Borrower Board also made the decision to approach the Lender Company for their funding requirements.
As per Lender company decision and at the request of the Borrower, the Lender has consented in approved providing a Intercompany Unsecured Loan for the purpose up to an aggregate amount of Limit…in one or more tranches.
The Parties wish to record the terms of the Loan in the manner set forth in this Agreement.
NOW IT IS HEREBY AGREED as follows:
- The Lender has sanctioned the loan not exceeding the amount of Rs. Limit….. in one or more tranches as a Intercompany Unsecured Loan to the Borrower for the stated purpose to be disbursed as and when so mutually decided by parties.
- The Borrower shall repay the loan to Lender as and when demand is made by the lender or as may be mutually agreed between the Parties. However, the loan may be repaid any time by the Borrower.
- The Borrower be and is hereby agreed to utilised the Loan facility exclusively for its Investments and operations.
- The Loan is unsecured.
- The loan transactions that were done before executing the written loan agreement were agreed upon verbally as an oral agreement, but now we are writing a loan agreement that is being notarized for further transaction whenever required.
- The Loan shall be payable on demand.
- The Lender has the option for conversion of outstanding loan and interest, wholly or partially, into Equity at any time by giving a simple request/notice to the borrower Company, whether equity or preference at a price as may be decided by and between the parties in line with the applicable laws of the land.
- Both the Parties are entitled to assign all or any part of its rights, obligations hereunder by giving intimation to each other. Lender may assign to any other person all or any part of its rights and benefits hereunder. In the event of any such permitted assignment as aforesaid, the assignee shall be substituted for the assignor for all the purposes hereof and shall have the same rights against the Borrower as it would have had if it had been a party hereto as a lender.
- At the end of the year, the interest rate will be decided by both parties in a mutual manner.
- Any notice or other communication under or in connection with this Agreement is to be in writing in the English language and signed by or on behalf of the Party giving it. The notice or communication may be served by being delivered personally or sending it by facsimile transmission or by registered post to the Party due to receive the notice or communication at the address provided hereunder or such other address as that Party may specify from time to time in writing to the other Party. Communication address of both the parties:
Borrower’s address:
Lender’s address:
- The Parties warrant that the individual executing this Agreement on behalf of each Party has been fully empowered to do so and that all necessary corporate actions required to authorize the execution of this Agreement have been taken by such Party, it being agreed that it shall not be necessary for either Party to enquire or verify whether such action has in fact been taken.
- This loan agreement will be valid for one year, and if no one has any objections, it will be continue every year for up to ten years. Unless either party gives written notice to the other party not less than 30 days prior to the expiration of any term, notifying the other party that such party is terminating this Agreement upon the date on which the current term expires
IN WITNESS WHEREOF the Parties hereto have executed these presents the day and year first hereinabove written.
SIGNED and DELIVERED for and on behalf of SIGNED and DELIVERED for and on behalf of
“Borrower”
Company Name
“Lender”
Company Name
Director Name
Authorized Signatory
Director Name
Authorized Signatory
WITNESSES:
1. Name:
Address:
2. Name:
Address:
Signature Page to Intercompany Loan Agreement
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