Questions & Answers
Can a shareholder in a company loan money to the company with interest?
Can a shareholder in a company give a loan to the company, and expect an interest payment from the company - legally?
If not "interest", can there be an agreed fixed sum that the company will pay the shareholder specifically for providing this short-term "loan" to meet the company's working capital requirements?
The point to note is that it's not just any individual giving money to the company, but actually a shareholder "loaning" money to the company for an expected monetary return.
Hi Questioner,
Good day!
With reference to your question, please be informed that as per the UAE Laws, lending money with interest is allowed for licensed banks and financial institutions only.
Any individuals involved in money lending (whether the said interest is explicit or implicit) will be liable to a jail sentence for a period not less than one (1) year and a fine not less than AED Fifty Thousand (50,000).
However, since you are lending money to a company in the capacity of a shareholder, you may execute an agreement with other shareholders that you require extra profit % or other benefits in addition to the percentage mentioned in Memorandum (MoA).
For further assistance, kindly contact:
Adv. Abdul Haq
Legal Consultant
Best regards.