Loan note instrument template - in brief
One of the ways to raise money: Most businesses will need to raise money at some point during the normal business lifecycle. There are a number of ways to do this, from external investment to crowdfunding. One of the many ways that companies commonly raise money is by borrowing it from someone else. Sometimes this may be achieved by way of a loan agreement, however, sometimes a company may issue 'loan notes' or 'notes' to one or more persons (otherwise known as 'noteholders') as a way of evidencing a debt owed by the company to them. In this instance, you would use a loan note instrument.
Legal instrument: This loan note instrument template is an 'instrument' that is signed by a company setting out the terms on which notes may be issued to multiple noteholders. Even though notes are issued to multiple noteholders, notes issued under the instrument are treated as a single debt owed by a company.
Notes: The notes issued under this loan note agreement will bear a fixed rate of interest and are unsecured. The loan note instrument template includes options for interest to be paid before the total amount of the loan represented by the 'notes' is repaid or for interest to be paid in a lump sum together with the total amount of the loan represented by the notes on one or more specified dates.
Loan note certificate: The loan note certificate should be used alongside this loan note instrument and a certificate should be issued to each noteholder with details of their notes.
What does this loan note instrument template include?
Key provisions: this loan note instrument template includes the option to include the following sections, amongst others:
- The notes - this section includes details of the notes that will be issued by the company, including the value of the notes. It also makes it clear that the notes will be unsecured and includes an obligation to issue a loan note certificate to the noteholders.
- Interest - this section sets out the interest rate that will be payable in connection with the loan note amount and whether the interest will be compounded.
- Repayment - this section sets out the terms on which the loan being made under this agreement must be repaid, including the notice period that must be provided in order for early repayment to be made.
- Transfer of notes - this section sets out whether or not the notes are transferrable. Transfer of notes refers to transferring of title to the notes, voluntarily, by one party to another.
- Transmission of notes - this section deals with the transmission of the notes in the event of the death or bankruptcy of the noteholder.
- Register - this section includes an obligation on the company to keep a register of noteholders, and sets out the information that must be included in the register.
- Events of default - this section makes it clear that the borrower (i.e. the company) will automatically default (breach the loan agreement) if any of the listed events are to happen. Upon the occurrence of an event of default, the noteholder/lender has the option to call in the loan immediately and terminate the agreement.
- Operation of noteholder majority - this section includes the process that the company must follow in order to obtain consent from noteholders
How can I be sure that the loan note instrument is of high quality?
Lawyer-made content: Docue’s loan note instrument template is drafted and maintained by expert business lawyers. Our modern technology combined with our lawyer-made content allows you to create lawyer-grade legal documents with just a few clicks.
Support available: The loan note instrument template includes guidance prepared by our lawyers that supports you through the drafting process.
Full contract process: Signatures can be collected electronically, and all contracts you make are saved in your company's own contract account.
Tags: loan note instrument template, loan note instrument, noteholders, loan notes
