Shareholder Loan Agreement — Pret (Quebec)
Province de Québec
(Code civil du Québec, arts. 2312-2332 — Loi de l'impôt sur le revenu, art. 15(2) et 20(1)(c))
Fait à [Lieu de signature], le [Date de la convention].
1. IDENTIFICATION DES PARTIES
LA SOCIÉTÉ : [Dénomination sociale], une société incorporée en vertu des lois de la Province de Québec, ayant son siège social au [Adresse du siège social], immatriculée au Registraire des entreprises du Québec sous le NEQ [NEQ], représentée aux présentes par [Signataire autorisé], dûment autorisé(e) à signer les présentes (ci-après la « Société »).
L'ACTIONNAIRE : [Nom de l'actionnaire], domicilié(e) au [Adresse de l'actionnaire], détenant [Pourcentage d'actions] % des actions émises et en circulation de la Société (ci-après l'« Actionnaire »).
La Société et l'Actionnaire sont ci-après collectivement désignés les « Parties ».
2. NATURE ET DIRECTION DU PRÊT
La présente convention constate un prêt consenti selon la direction suivante : [Direction du prêt].
Aux termes de la présente convention, le PRÊTEUR verse au BÉNÉFICIAIRE la somme décrite à l'article 3 ci-après, à charge pour le BÉNÉFICIAIRE de la rembourser conformément aux modalités stipulées.
3. MONTANT ET VERSEMENT DU PRÊT
Le montant du prêt consenti est de [Montant principal] $ ([Montant en lettres]) en dollars canadiens (ci-après le « Capital »).
Le versement du Capital a été ou sera effectué le [Date du versement], par la modalité suivante : [Modalité de versement].
L'objet du présent prêt est le suivant : [Objet du prêt].
Conformément à l'article 2331 du Code civil du Québec, la présente convention constitue une reconnaissance de dette et interrompt la prescription extinctive applicable à la créance.
4. INTÉRÊTS
Le Capital portera intérêt au taux annuel de [Taux annuel] %, calculé selon la méthode suivante : [Type d'intérêt], à compter du [Date début intérêts], conformément à l'article 1565 du Code civil du Québec.
Les intérêts seront payés [Fréquence paiement intérêts]. Pour les prêts au taux prescrit de l'ARC, les intérêts doivent être payés au plus tard le 30 janvier de l'année civile suivante afin d'éviter l'application des règles d'attribution et d'avantage à l'actionnaire prévues à l'article 15(2) de la Loi de l'impôt sur le revenu (Canada), L.R.C. 1985, ch. 1 (5e suppl.).
Le taux d'intérêt stipulé respecte les dispositions de l'article 347 du Code criminel du Canada, qui interdit un taux d'intérêt criminel supérieur à 60 % par année. Le taux convenu entre les Parties est au moins égal au taux prescrit trimestriellement par l'Agence du revenu du Canada (ARC), conformément aux exigences de la LIR pour les prêts entre personnes liées.
5. MODALITÉS DE REMBOURSEMENT
Le BÉNÉFICIAIRE s'engage à rembourser le Capital selon la modalité suivante : [Modalité de remboursement].
La date d'échéance finale pour le remboursement intégral est fixée au [Date d'échéance]. Le montant de chaque versement est de [Montant du versement] $.
Tout paiement sera d'abord imputé aux intérêts échus, puis au Capital, conformément aux articles 1569 et suivants du Code civil du Québec. Un reçu sera remis pour chaque paiement effectué.
AVERTISSEMENT FISCAL (prêt société → actionnaire) : Les Parties reconnaissent que, conformément à l'article 15(2) de la Loi de l'impôt sur le revenu (Canada), si le prêt consenti par la Société à l'Actionnaire n'est pas remboursé avant la fin de la première année d'imposition de la Société se terminant après l'octroi du prêt, le montant du prêt sera inclus dans le revenu de l'Actionnaire pour l'année d'imposition au cours de laquelle le prêt a été reçu, sauf si la présente convention satisfait aux conditions de l'article 15(2.4) LIR (prêt pour l'acquisition d'une résidence, d'actions ou d'un véhicule utilisé pour le travail).
6. DÉFAUT ET DÉCHÉANCE DU TERME
Le BÉNÉFICIAIRE sera en défaut si l'un ou l'autre des événements suivants survient : (i) le non-paiement d'une somme due aux termes de la présente convention dans les quinze (15) jours suivant son échéance ; (ii) l'insolvabilité ou la faillite du BÉNÉFICIAIRE ; (iii) le non-respect de l'une quelconque des autres obligations stipulées dans la présente convention.
En cas de défaut non régularisé dans les quinze (15) jours d'un avis écrit du PRÊTEUR, la totalité du Capital impayé et des intérêts deviendra immédiatement exigible en vertu de l'article 1514 du Code civil du Québec (déchéance du terme). Le solde en défaut portera intérêt au taux contractuel jusqu'au remboursement intégral.
7. DIVULGATION FISCALE
Les Parties reconnaissent avoir été informées des implications fiscales du présent prêt d'actionnaire, notamment : (i) les règles d'avantage à l'actionnaire prévues à l'article 15(2) de la Loi de l'impôt sur le revenu (Canada) pour les prêts de la société à l'actionnaire ; (ii) la déductibilité potentielle des intérêts pour la société en vertu de l'article 20(1)(c) LIR pour les prêts de l'actionnaire à la société ; (iii) les règles relatives au taux prescrit par l'ARC et les exigences de paiement annuel des intérêts ; (iv) les obligations déclaratives au fédéral (formulaire T2200, T2) et au provincial (TP-66-V de Revenu Québec).
Les Parties s'engagent à effectuer toutes les déclarations fiscales requises relativement au présent prêt, auprès de l'Agence du revenu du Canada et de Revenu Québec, dans les délais prescrits. La présente convention ne constitue pas un avis juridique ou fiscal. Les Parties sont fortement invitées à consulter un comptable agréé (CPA) ou un conseiller fiscal qualifié.
8. BONNE FOI
Conformément à l'article 1375 du Code civil du Québec, les Parties s'engagent à se conduire de bonne foi tant au moment de la naissance de la présente obligation que lors de son exécution et de son extinction. Les Parties reconnaissent que la présente convention est conclue librement et de bonne foi, à des conditions qui reflètent la juste valeur marchande et qui satisfont aux exigences de pleine concurrence applicables aux opérations entre personnes liées, dans la mesure où cela est requis par la Loi de l'impôt sur le revenu (Canada) et la Loi sur les impôts (Québec).
9. DISPOSITIONS GÉNÉRALES
La présente convention constitue l'intégralité de l'entente entre les Parties relativement au prêt d'actionnaire décrit. Toute modification doit être constatée par écrit et approuvée par résolution du conseil d'administration, le cas échéant. Si une disposition est jugée invalide, les autres demeureront en vigueur.
La présente convention lie les Parties ainsi que leurs héritiers, exécuteurs testamentaires, administrateurs, successeurs et ayants droit. Elle est rédigée en langue française conformément à l'article 55 de la Charte de la langue française du Québec (Loi sur la langue officielle et commune du Québec).
10. LOI APPLICABLE
La présente convention de prêt d'actionnaire est régie par les lois de la Province de Québec, notamment le Code civil du Québec (arts. 1375, 1514, 1553, 1565, 2312-2332, 2331), la Loi sur les sociétés par actions (Québec), L.R.Q., ch. S-31.1, ainsi que par les lois fiscales fédérales et provinciales applicables, notamment la Loi de l'impôt sur le revenu (Canada), L.R.C. 1985, ch. 1 (5e suppl.), et la Loi sur les impôts (Québec), L.R.Q., ch. I-3. Tout litige découlant de la présente convention sera soumis à la compétence exclusive des tribunaux de la Province de Québec.
11. SIGNATURES
EN FOI DE QUOI, les Parties ont signé la présente convention de prêt d'actionnaire à [Lieu de signature], le [Date de la convention].
Chaque partie reconnaît avoir lu et compris l'intégralité du présent document et s'engage à respecter toutes les obligations qui y sont stipulées.
Société (par son signataire autorisé)
[Signataire autorisé]
Signature
Date: ________________
Actionnaire
[Nom de l'actionnaire]
Signature
Date: ________________
What Is a Shareholder Loan Agreement — Pret (Quebec)?
A Quebec shareholder loan agreement (convention de prêt d'actionnaire) is a formal legal document that governs a loan transaction between a shareholder and their corporation. Governed by the Code civil du Québec arts. 2312-2332 on the contract of loan, article 2331 C.c.Q. on the interruption of prescription, and the critical provisions of the federal Income Tax Act (Canada) under sections 15(2), 15(2.4), 15(2.6), and 20(1)(c), this agreement is one of the most tax-sensitive documents in Canadian corporate and commercial practice.
Shareholder loans exist in two fundamental forms. In the first, the corporation lends money to a shareholder — a scenario that triggers the rigorous application of ITA s.15(2). Under this provision, the full amount of any loan made by a corporation to a shareholder (or to a person connected with a shareholder) must be included in the shareholder's income for the year in which the loan was received, unless: (a) the loan is repaid before the end of the first taxation year of the corporation that ends after the loan was made; or (b) the loan qualifies for one of the specific exceptions under s.15(2.4) (home purchase loan, share acquisition loan, vehicle loan for employment use, or loan to employee). In the second form, the shareholder lends money to the corporation — a common method of providing working capital that avoids diluting share equity. In this case, the corporation may deduct the interest paid to the shareholder under ITA s.20(1)(c) if the borrowed funds are used to earn income from a business or property.
Proper documentation through a shareholder loan agreement is essential for both scenarios. Without documentation, the CRA and Revenu Québec may characterize the transfer of funds as a deemed salary, dividend, or benefit rather than a genuine loan, resulting in significant tax consequences including gross-up and dividend tax credit issues for the shareholder, and potential penalties for the corporation.
The interest rate provisions are particularly important. For corporation-to-shareholder loans, the interest must be charged at least at the CRA prescribed rate (set quarterly) to avoid the inclusion of a taxable shareholder benefit under ITA s.15(1). The prescribed rate loan strategy is highly effective: by charging and actually collecting interest at the prescribed rate, the corporation and shareholder can legitimately manage the tax characterization of the loan. Interest must be paid no later than January 30 of the following year to maintain compliance.
The board resolution requirement is equally critical. Under the Loi sur les sociétés par actions (Québec), L.R.Q., ch. S-31.1, the board of directors must formally authorize any significant financial transaction, including shareholder loans. A board resolution confirming the authorization of the loan, its terms, and its commercial purpose demonstrates that the transaction was made in the ordinary course of business — a key requirement for qualifying for certain ITA exceptions.
Under CCQ art. 2331, the shareholder loan agreement also functions as a reconnaissance de dette, interrupting the three-year prescriptive period under CCQ art. 2925 and providing clear, written evidence of the debt obligation enforceable before Quebec courts.
The agreement should also address subordination. Shareholder loans are typically subordinated to the claims of institutional creditors (banks, institutional lenders) as a condition of external financing. A subordination clause protects senior lenders and may be required by the corporation's bank before providing credit facilities.
Finally, the good faith obligation under CCQ art. 1375 requires all parties to act honestly and fairly in the performance of the shareholder loan agreement, reflecting the broader principle that corporate transactions between related parties must reflect genuine commercial intent and arm's-length terms where required by tax law.
Article 1375 of the Civil Code of Quebec imposes a duty of good faith in contractual performance. Article 1379 of the Civil Code of Quebec defines contracts of adhesion. Article 1432 of the Civil Code of Quebec governs interpretation against the drafter. Article 1457 of the Civil Code of Quebec establishes extra-contractual liability. Article 1458 of the Civil Code of Quebec addresses contractual liability. Section 6 of the Act Respecting Labour Standards of Quebec mandates minimum employment conditions. Section 10 of the Charter of Human Rights and Freedoms of Quebec prohibits discrimination. The Superior Court of Quebec and the Court of Quebec have jurisdiction over civil disputes arising from agreements governed by Quebec law.
When Do You Need a Shareholder Loan Agreement — Pret (Quebec)?
A Quebec shareholder loan agreement is needed in several common corporate and personal financial situations. The most frequent scenario is when a business owner (shareholder) withdraws funds from their corporation for personal use — to purchase a vehicle, fund a home renovation, cover personal expenses, or manage short-term cash flow. Without a documented shareholder loan agreement, CRA and Revenu Québec will treat this withdrawal as a deemed dividend or shareholder benefit under ITA s.15, making it taxable income in the shareholder's hands without the ability to pay dividends at a lower effective rate.
Shareholder loan agreements are equally important when the situation is reversed — when a shareholder injects personal funds into their corporation as a loan rather than as additional share capital. This commonly occurs when a corporation faces a temporary cash shortfall and the shareholder chooses to lend money to the corporation rather than subscribe for additional shares. A properly documented shareholder-to-corporation loan allows the corporation to deduct the interest paid under ITA s.20(1)(c), reduces the overall effective tax rate on the transaction, and gives the shareholder priority over other unsecured creditors in the event of corporate insolvency.
Shareholder loans are also critical during corporate restructuring. When amalgamating companies, reorganizing share capital, or preparing for an asset sale, shareholder loan accounts must be properly documented and accounted for. Undocumented or informally recorded shareholder loans can create significant complications during due diligence for business sales and acquisitions.
Startup companies in Quebec frequently use shareholder loans as a flexible form of initial capitalization, allowing the founders to inject funds that can be repaid tax-efficiently once the company becomes profitable. Unlike dividends (which require post-tax profits) or salaries (subject to payroll taxes), the repayment of a genuine shareholder loan is not taxable in the hands of the shareholder.
Finally, any time a CRA or Revenu Québec audit focuses on a corporation's shareholder loan account, a properly executed shareholder loan agreement is the primary defence against adverse tax reassessments. The agreement demonstrates the commercial nature of the transaction, the arm's-length interest rate, the board's authorization, and the genuine intention to repay the loan.
A shareholder loan agreement is particularly important when the corporation has multiple shareholders, as other shareholders need assurance that advances to one shareholder are properly documented, bear market interest, and will be repaid on equal terms. Without documentation, informal advances to a majority shareholder can expose the corporation to oppression remedy claims by minority shareholders under the Quebec Business Corporations Act or the Canada Business Corporations Act. The agreement is also needed when the shareholder-creditor wishes to register a hypothec (security interest) on corporate assets under arts. 2660-2802 C.c.Q. to secure repayment of the shareholder loan ahead of unsecured creditors in the event of the corporation's insolvency. Finally, the agreement is required when the corporation's external accountants or auditors require documentation of all shareholder loan transactions for annual financial statement preparation, as improperly documented shareholder loans can result in audit qualifications and disclosure issues. The shareholder loan agreement is also essential during due diligence processes for mergers, acquisitions, or investments in Quebec corporations, where potential buyers and investors review all intercompany and related-party transactions. Well-documented shareholder loans reflect sound corporate governance and support a smoother due diligence process. This document is governed by the Civil Code of Quebec, which requires that all contracting parties act in good faith (art. 1375 C.c.Q.) and that obligations be performed in accordance with the requirements of good faith at all stages of formation, performance, and extinction of the contract. The parties acknowledge that Quebec courts have jurisdiction over any dispute arising from this agreement, and that the applicable law is the law of the Province of Quebec. Legal advice from a qualified Quebec notary or lawyer is recommended before signing.
Article 1385 of the Civil Code of Quebec establishes the foundation of contractual obligations, while Article 1590 of the Civil Code of Quebec governs remedies for non-performance. Section 40 of the Consumer Protection Act of Quebec (CQLR c P-40.1) regulates unfair contract terms. The Commission des normes de l'equite de la sante et de la securite du travail (CNESST) enforces the Act Respecting Labour Standards of Quebec (CQLR c N-1.1). Section 49 of the Charter of Human Rights and Freedoms of Quebec protects fundamental civil liberties. The Tribunal administratif du Quebec (TAQ) hears administrative disputes under Section 14 of the Act Respecting Administrative Justice of Quebec (CQLR c J-3). The Regie du logement du Quebec (now Tribunal administratif du logement) adjudicates residential tenancy disputes under Section 28 of the Act Respecting the Regie du logement of Quebec. The Autorite des marches financiers du Quebec (AMF) regulates financial services under Section 4 of the Act Respecting the Autorite des marches financiers of Quebec. Revenu Quebec administers the Taxation Act of Quebec (CQLR c I-3) and the Act Respecting the Quebec Sales Tax of Quebec (CQLR c T-0.1). The Barreau du Quebec and the Chambre des notaires du Quebec regulate legal professionals under Section 1 of the Professional Code of Quebec (CQLR c C-26).
What to Include in Your Shareholder Loan Agreement — Pret (Quebec)
A valid Quebec shareholder loan agreement requires several essential components for legal validity, tax compliance, and enforceability. First, complete identification of both parties: the corporation must be identified with its full legal name, NEQ number, registered address, and the name and title of its authorized signatory. The shareholder must be identified with their full legal name, address, and ownership percentage — the ownership percentage is relevant for determining which CRA rules apply.
Second, the direction of the loan (corporation-to-shareholder or shareholder-to-corporation) must be clearly specified, as the applicable tax rules under ITA s.15(2) or s.20(1)(c) differ significantly based on the direction.
Third, the principal amount, disbursement date, disbursement method, and purpose of the loan must be fully documented. The purpose is particularly important for corporation-to-shareholder loans seeking to qualify for the exceptions under ITA s.15(2.4) (home purchase, share acquisition, employment vehicle).
Fourth, a board resolution authorizing the loan is required under Quebec corporate law. The convention should reference the date and number of the resolution, and a certified copy should be attached.
Fifth, the interest rate must be set at least at the CRA prescribed rate for corporation-to-shareholder loans, to avoid the inclusion of a taxable benefit under ITA s.15(1). The interest payment frequency must specify that interest will be paid annually no later than January 30 of the following year for CRA compliance.
Sixth, the repayment terms must be clearly defined: lump sum, monthly installments, quarterly, or on demand. For corporation-to-shareholder loans, the repayment must occur before the end of the first fiscal year of the corporation ending after the loan was made, to avoid income inclusion under ITA s.15(2.6).
Seventh, security provisions should describe any collateral granted to secure the loan, with publication requirements at the RDPRM. A subordination clause confirming that the shareholder loan ranks behind institutional creditors may also be required.
Eighth, a thorough tax disclosure clause must confirm that both parties have been informed of the tax implications of the shareholder loan under ITA s.15(2), 15(2.4), 15(2.6), and 20(1)(c), and of the reporting obligations to CRA and Revenu Québec.
Ninth, default and acceleration provisions under CCQ art. 1514, good faith under art. 1375, and the governing law clause confirming Quebec corporate and civil law jurisdiction complete the document.
Seventh, the board of directors resolution authorizing the loan should be referenced or attached. Eighth, repayment terms must be precise: the total principal amount, interest rate (at minimum the CRA prescribed rate to avoid ITA s.15(2) income inclusion), payment schedule, and maturity date. Ninth, any security (hypothec on corporate assets under arts. 2660-2802 C.c.Q.) must be described and will require separate registration in the Register of Personal and Movable Real Rights (RPMRR) to be enforceable. Tenth, default provisions specify what constitutes a default (missed payment, insolvency, change of control) and the creditor's remedies. Eleventh, subordination provisions may be required by senior lenders if the shareholder loan ranks behind bank debt. Twelfth, the governing law clause specifying Quebec civil law, good faith (art. 1375 C.c.Q.), and the jurisdiction of Quebec courts, along with a statement that the agreement complies with applicable corporate legislation, completes the document. Good faith under art. 1375 C.c.Q. governs the entire lending relationship between shareholder and corporation, confirming transparency and fairness throughout. Under Quebec law, any provision of this agreement that contravenes a rule of public order (ordre public) shall be deemed null and void, while the remaining provisions shall continue in full force and effect. The parties agree that any dispute that cannot be resolved amicably shall be submitted to the competent Quebec civil court having jurisdiction over the subject matter and amount in dispute, whether the Court of Quebec (Division des petites créances for amounts up to $15,000, or the regular civil division), or the Superior Court of Quebec for higher-value matters. Under Quebec law, Article 1385 of the Civil Code of Québec (CCQ) and Section 79.1 of the Act Respecting Labour Standards (CQLR c N-1.1) govern the core requirements for this type of document.
Under Quebec law, the Civil Code of Quebec (CCQ) governs contractual obligations and property rights. The Act Respecting Labour Standards (CQLR c N-1.1) and the Commission des normes, de l'equite, de la sante et de la securite du travail (CNESST) regulate employment. The Consumer Protection Act (CQLR c P-40.1) and the Office de la protection du consommateur (OPC) protect consumer rights. The Act Respecting the Protection of Personal Information in the Private Sector governs data privacy through the Commission d'acces a l'information (CAI). Revenu Quebec administers provincial tax obligations. The forms-legal.com Shareholder Loan Agreement (Quebec) template covers the mandatory elements under Civil Code of Québec (CCQ), art. 2312-2332. Under Quebec law, Article 35 of the Code of Civil Procedure (CQLR c C-25.01) govern the core requirements for this type of document.
Article 1590 of the Civil Code of Quebec provides remedies including specific performance and damages. Article 1601 of the Civil Code of Quebec establishes compensatory damages principles. Article 1604 of the Civil Code of Quebec governs the right to resolution. Article 1613 of the Civil Code of Quebec limits damages to foreseeable losses. Article 1623 of the Civil Code of Quebec allows liquidated damages clauses. Article 2803 of the Civil Code of Quebec places the burden of proof on the claiming party. Section 41 of the Consumer Protection Act of Quebec regulates warranty obligations. Section 53 of the Consumer Protection Act of Quebec establishes merchant liability. The Autorite des marches financiers du Quebec supervises financial transactions. The Office de la protection du consommateur du Quebec enforces consumer rights. Forms-legal.com provides this Quebec-compliant template as a starting point.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Shareholder Loan Agreement — Pret (Quebec) (Quebec) [Legal document template]. Forms Legal. https://forms-legal.com/quebec/financial/agreements/shareholder-loan-agreement-quebec
"Shareholder Loan Agreement — Pret (Quebec) (Quebec)." Forms Legal, 2026, https://forms-legal.com/quebec/financial/agreements/shareholder-loan-agreement-quebec.
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author = {{Forms Legal}},
title = {Shareholder Loan Agreement — Pret (Quebec) (Quebec)},
year = {2026},
howpublished = {\url{https://forms-legal.com/quebec/financial/agreements/shareholder-loan-agreement-quebec}},
note = {Free legal document template. Based on Civil Code of Québec (CCQ), art. 2312-2332}
}Frequently Asked Questions
A shareholder loan agreement (convention de prêt d'actionnaire) is a formal written contract that documents the financial terms of a loan between a shareholder and their corporation. It is critical for tax compliance because the Canada Revenue Agency (CRA) and Revenu Québec apply strict rules under section 15(2) of the Income Tax Act (Canada) to undocumented or improperly structured shareholder loans. Under ITA s.15(2), if a corporation makes a loan to a shareholder, the full amount of the loan must be included in the shareholder's income for the year in which the loan was received, unless it is repaid within one year after the end of the corporation's fiscal year in which the loan was made, or unless the loan meets the conditions of an exception under s.15(2.4) (loan for home purchase, share acquisition, or vehicle for employment). A properly documented shareholder loan agreement demonstrates that the transaction was a genuine arm's-length loan and not a disguised salary, dividend, or benefit.
Under section 15(2) and 15(2.6) of the Income Tax Act (Canada), a loan made by a corporation to a shareholder must generally be repaid before the end of the first taxation year of the corporation that ends after the loan was made. If the loan is not repaid within this period, the full amount is included in the shareholder's income for the year in which the loan was received. However, if the loan is later repaid, the shareholder can claim a deduction under s.20(1)(j) in the year of repayment. There are important exceptions: if the loan is made to allow the shareholder to purchase a dwelling, acquire employer shares through a stock option plan, or acquire a vehicle for employment use, the loan may not be included in income provided it was made in the ordinary course of business and on terms comparable to those available to arm's-length parties. The shareholder loan agreement must document the purpose of the loan to qualify for any exceptions.
For shareholder loans in Quebec, the Canada Revenue Agency requires that the loan bear interest at least at the CRA prescribed rate to avoid the inclusion of a shareholder benefit under ITA s.15(2) and the application of income attribution rules. The prescribed rate is set quarterly by the CRA and is available on the CRA website (canada.ca). If a corporation loans money to a shareholder at below the prescribed rate, the difference between the prescribed rate and the actual rate charged constitutes a taxable shareholder benefit under ITA s.15(1), which must be included in the shareholder's income. For loans made by a shareholder to their corporation, the corporation may deduct the interest paid under ITA s.20(1)(c) if the borrowed money is used to earn income from a business or property. The shareholder must report the interest received as income. Both the CRA and Revenu Québec audit shareholder loan accounts closely, particularly when the shareholder's loan account has a debit balance (meaning the shareholder owes money to the corporation).
A board resolution is required for a shareholder loan agreement because under corporate law in Quebec (Loi sur les sociétés par actions, L.R.Q., ch. S-31.1), the board of directors is responsible for managing the corporation's affairs, including approving significant financial transactions. Specifically, section 115 of the Loi sur les sociétés par actions requires that the board authorize major transactions, and loans to shareholders or directors require board approval to be valid and binding on the corporation. Without a properly documented board resolution, the CRA and Revenu Québec may challenge the characterization of the transaction and argue that it was not made in the ordinary course of business — which is one of the requirements for qualifying for exceptions to the shareholder benefit rules under ITA s.15(2.4). The board resolution should specify the amount, interest rate, repayment terms, and purpose of the loan, and a copy should be annexed to the shareholder loan agreement.
A corporation-to-shareholder loan and a shareholder-to-corporation loan have very different tax implications under Canadian income tax law. When a corporation lends money to a shareholder, ITA s.15(2) applies and requires that the loan be repaid within one year after the end of the corporation's fiscal year, or the full amount will be included in the shareholder's income as a deemed benefit. The corporation-to-shareholder loan must also bear interest at least at the CRA prescribed rate to avoid an additional benefit under s.15(1). When a shareholder lends money to their corporation, the tax dynamics are reversed. The corporation may deduct the interest paid to the shareholder under ITA s.20(1)(c) if the funds are used to earn income. The shareholder must report the interest received as income on their personal tax return. A shareholder-to-corporation loan is common when a corporation needs working capital and the shareholder wants to inject funds without diluting share equity. It is also commonly used in corporate restructuring to avoid the costs and formalities associated with issuing new shares. In both cases, proper documentation with a signed shareholder loan agreement is essential for tax compliance.
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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