Director's Loan Agreement (New Zealand)
Companies Act 1993
DIRECTOR'S LOAN AGREEMENT
Companies Act 1993 (New Zealand)
This Director's Loan Agreement is entered into on [Agreement Date] between:
[Company Name] (Companies Office No. [Company Number]), of [Company Address] (the "Company"); and
[Director Name], of [Director Address] (the "Director").
BACKGROUND
The parties wish to record the terms of a loan between them on the basis of a [Loan Direction] arrangement, with a loan amount of NZD [Loan Amount] for the purpose of [Loan Purpose].
1. LOAN TERMS
1.1 Loan Amount: NZD [Loan Amount].
1.2 Purpose: [Loan Purpose]
1.3 Interest Rate: [Interest Rate]. Interest (if any) will accrue daily on the outstanding balance and will be paid monthly.
1.4 Repayment: The loan is repayable [Repayment Type], with the repayment date being [Repayment Date].
2. SHAREHOLDER APPROVAL
2.1 The parties acknowledge that where the Company lends money to a director, shareholder approval may be required under section 107 of the Companies Act 1993. Shareholder approval was obtained on [Approval Date].
2.2 The Director acknowledges that the terms of this loan are no more favourable than those available to an arm's-length borrower.
3. TAX
3.1 The parties acknowledge their respective tax obligations under the Income Tax Act 2007, including any fringe benefit tax (FBT) obligations arising in connection with an interest-free or low-interest loan from the Company to the Director.
3.2 The Company will account for any FBT liability in its FBT return and pay the appropriate FBT to Inland Revenue.
3.3 Interest paid by the Company on a loan from the Director to the Company may be deductible by the Company under the Income Tax Act 2007 to the extent the loan funds are used to derive assessable income.
4. GENERAL
4.1 This Agreement is governed by the laws of New Zealand, including the Companies Act 1993 and the Contract and Commercial Law Act 2017.
4.2 This Agreement constitutes the entire agreement between the parties regarding the loan and supersedes all prior discussions.
SIGNED:
For and on behalf of [Company Name]:
Signature: ______________________________
Name: [Director Name]
Date: [Agreement Date]
Signed by the Director, [Director Name]:
Signature: ______________________________
Date: [Agreement Date]
Director (on behalf of Company)
________________
Signature
Director (in personal capacity)
________________
Signature
What Is a Director's Loan Agreement (New Zealand)?
A Director's Loan Agreement in New Zealand records the amount advanced, the repayment schedule, interest, and the lender's remedies on default between lender and borrower. The agreement is governed by the Contract and Commercial Law Act 2017, with the Companies Act 1993 applying to director-duty and solvency aspects.
When Do You Need a Director's Loan Agreement (New Zealand)?
A Director's Loan Agreement is needed whenever parties in New Zealand wish to formalize their arrangement regarding business operations, corporate governance, and commercial transactions. There are numerous situations in which this document becomes essential for protecting the interests of all involved parties. In a business context, you may need a Director's Loan Agreement when entering into new commercial relationships, when formalizing existing arrangements that have previously been informal, when expanding your business operations, or when restructuring existing agreements. Companies registered with Companies Office should confirm proper documentation is maintained for all significant business transactions. You should also consider using a Director's Loan Agreement when there has been a change in circumstances that affects an existing arrangement, when you need to comply with new regulatory requirements, when you wish to update outdated documentation, or when professional advisors recommend formalizing certain aspects of your affairs. In New Zealand, maintaining current and accurate legal documentation is considered established standards and can help prevent costly disputes. It is generally advisable to prepare a Director's Loan Agreement before any issues arise, rather than trying to document terms after a dispute has already begun. Proactive documentation provides clarity and reduces the potential for misunderstandings. If you are unsure whether you need this document for your specific situation in New Zealand, consulting with a qualified legal professional can provide guidance tailored to your circumstances. The timing of executing a Director's Loan Agreement is also important. In New Zealand, certain documents must be executed before specific actions are taken or within prescribed time periods to be effective. Delaying the preparation of necessary legal documents can result in complications, lost rights, or additional costs. Therefore, it is recommended to prepare this document as early as possible once the need has been identified.
What to Include in Your Director's Loan Agreement (New Zealand)
A well-drafted Director's Loan Agreement for use in New Zealand should contain several essential elements to confirm it is legally effective and provides adequate protection for all parties. Party Identification: The document should clearly identify all parties involved, including their full legal names, addresses, and relevant identification numbers. For individuals in New Zealand, this may include identity card or passport numbers. For companies, registration numbers and registered addresses should be specified. Clear identification prevents disputes about who is bound by the agreement. Recitals and Background: The document should include background information explaining the context and purpose of the arrangement. This helps establish the parties' intentions and can be important in interpreting the terms of the document if any ambiguity arises later. The recitals section provides valuable context for the operative provisions that follow. Operative Terms: The core terms and conditions should be set out clearly and thoroughly. This includes the rights and obligations of each party, any conditions or prerequisites, the duration of the arrangement, and any limitations or restrictions. All key terms should be defined precisely to avoid ambiguity and potential disputes. Payment and Financial Terms: Where applicable, the document should specify any payments, fees, deposits, or other financial considerations. The amounts, currency (NZD), payment schedules, and methods of payment should be clearly stated. Any provisions for late payment, interest charges, or adjustments should also be included. Term and Termination: The document should specify its duration, including the start date, end date or conditions for expiry, and any provisions for renewal or extension. The circumstances under which either party may terminate the arrangement early should be clearly defined, along with any notice requirements and the consequences of termination. Dispute Resolution: The document should include provisions for resolving any disputes that may arise, such as negotiation, mediation, arbitration, or litigation. In New Zealand, parties may choose to specify the jurisdiction of New Zealand courts and the applicable law. Including a clear dispute resolution mechanism can save significant time and expense if disagreements occur. Governing Law and Jurisdiction: The document should specify that it is governed by the laws of New Zealand and that disputes shall be subject to the jurisdiction of New Zealand courts. This is particularly important in cross-border transactions or where parties are based in different jurisdictions. Signatures and Execution: The document must be properly signed by all parties or their authorised representatives. In New Zealand, certain documents may need to be witnessed, notarised, or executed as deeds to be legally effective. The date of execution should be clearly recorded, and each party should retain an original signed copy for their records. The forms-legal.com Director's Loan Agreement (New Zealand) provides a ready-to-use template that meets New Zealand legal requirements.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Director's Loan Agreement (New Zealand) (New Zealand) [Legal document template]. Forms Legal. https://forms-legal.com/new-zealand/business/corporate/directors-loan-agreement-new-zealand
"Director's Loan Agreement (New Zealand) (New Zealand)." Forms Legal, 2026, https://forms-legal.com/new-zealand/business/corporate/directors-loan-agreement-new-zealand.
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author = {{Forms Legal}},
title = {Director's Loan Agreement (New Zealand) (New Zealand)},
year = {2026},
howpublished = {\url{https://forms-legal.com/new-zealand/business/corporate/directors-loan-agreement-new-zealand}},
note = {Free legal document template. Based on Contract and Commercial Law Act 2017; Companies Act 1993}
}Also available for these jurisdictions:
Frequently Asked Questions
Director's loans in New Zealand are governed by the Companies Act 1993, which contains specific rules on transactions between a company and its directors. Under section 107 of the Companies Act 1993, a company may make a loan to a director only if the loan is approved by an ordinary resolution of shareholders or is made on terms no more favourable than those available to an arm's length borrower. The Companies Act 1993 requires that the terms of any loan from the company to a director must be disclosed to shareholders if the company has more than one shareholder. Conversely, when a director lends money to the company, the loan terms must be fair and reasonable and must not confer an unfair advantage on the director over other creditors. The Inland Revenue Department (IRD) may also scrutinise director's loans for tax purposes — in particular, interest-free loans from the company to a director may give rise to a fringe benefit tax (FBT) liability under the Income Tax Act 2007.
Yes. A director may lend money to a New Zealand company. This is a common source of funding for small and medium-sized companies, particularly start-ups and owner-operated businesses. When a director lends money to the company, the loan creates a debt owed by the company to the director. The director becomes a creditor of the company. If the company is liquidated, the director-lender's loan may be subordinated to the claims of third-party creditors if a court finds that the loan was made in circumstances that make it unconscionable for the director to rank equally with external creditors. To avoid this risk, directors should require that their loans are made on commercially reasonable terms, are properly documented, and are disclosed to all shareholders. Interest paid on a director's loan to the company may be deductible by the company for income tax purposes under the Income Tax Act 2007, provided the loan is used to derive assessable income. The director must return the interest income in their personal tax return.
Director's loans have significant tax implications under New Zealand's Income Tax Act 2007. When a company lends money to a director at an interest rate below the prescribed rate (the IRD's fringe benefit tax rate for low-interest loans), fringe benefit tax (FBT) may be payable by the company on the benefit conferred on the director. The FBT rate for the 2024–25 tax year for a low-interest loan is based on the prescribed rate published by the IRD. The company must account for FBT on the difference between the interest charged and the prescribed rate. If the loan is written off by the company, the amount written off may be treated as a dividend or a taxable benefit in the hands of the director. Director's loans should be reviewed regularly to require that any FBT obligations are correctly assessed and paid. GST at 15% does not generally apply to lending money, but the provision of credit may have other implications. Tax advice should be sought before entering into any director's loan arrangement.
If a New Zealand company enters liquidation under the Companies Act 1993, director's loans are treated as unsecured debts unless they are secured by a registered security interest under the Personal Property Securities Act 1999 or a mortgage over real property. Unsecured director loans rank behind secured creditors, preferential creditors (including employee entitlements under the Employment Relations Act 2000 and the Holidays Act 2003), and the costs of liquidation. In liquidation, the liquidator has power under the Companies Act 1993 to recover transactions made to related parties (including directors) within a specified period before liquidation — these are called 'voidable transactions'. Transactions at an undervalue, preferential transactions (favoring the director over other creditors), and certain security interests given to directors may be set aside. Directors who received payments on their loans within the specified period before liquidation may be required to repay those amounts to the liquidator for distribution to all creditors. Directors with secured loans should ensure their security interests are registered on the Personal Property Securities Register (PPSR).
A Director's Loan Agreement (New Zealand) does not legally require a lawyer in New Zealand, and individuals and businesses may draft and execute the document independently. The Companies Act 1993 does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified New Zealand lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The High Court of New Zealand has jurisdiction over disputes arising from this type of document, and Companies Office may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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