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Shareholder Loan Agreement Template
A Shareholder Loan Agreement documents the terms on which a corporation lends money to one of its shareholders (or to a person related to a shareholder). Our free Canadian template is drafted to satisfy the CRA Income Tax Act s.15(2) one-tax-year repayment rule, qualify for the s.15(2.4) bona-fide-commercial-terms exception, and address the s.80.4(2) deemed-interest-benefit rule with the CRA quarterly prescribed rate.
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SHAREHOLDER LOAN AGREEMENT
Maplewood Holdings Ltd. To Diana Khaledi
LENDING CORPORATION
Maplewood Holdings Ltd.
180 Lake Shore Boulevard East, Toronto, ON M5A 3X7
Fiscal year-end: 2026-12-31
Fiscal year-end: 2026-12-31
By: Reza Farhadi, Chief Financial Officer and Director
BORROWER SHAREHOLDER
Diana Khaledi
218 Roxborough Drive, Toronto, ON M4W 1X3
Holding: 50% of the Lending Corporation
Role: President, Chief Executive Officer and Director
Holding: 50% of the Lending Corporation
Role: President, Chief Executive Officer and Director
Loan date: 2026-06-15
Principal: 75,000.00 CAD · Rate: 5.5% p.a.
THIS SHAREHOLDER LOAN AGREEMENT (the "Agreement") is made on 2026-06-15 between Maplewood Holdings Ltd. (the "Lending Corporation"), a corporation existing under section 20 of the Business Corporations Act (Ontario), R.S.O. 1990, c. B.16, and Diana Khaledi (the "Borrower"), who is a shareholder of the Lending Corporation holding approximately 50% of its issued and outstanding shares. The Lending Corporation has agreed to lend the principal sum of 75,000.00 CAD (the "Loan") to the Borrower on the terms set out below, intended to satisfy the bona-fide-commercial-terms exception under subsection 15(2.4) of the Income Tax Act and to avoid the s. 15(2) deemed-dividend treatment, in the Province of Ontario.
1.
LOAN AND INTEREST
The Lending Corporation hereby lends the principal sum of 75,000.00 CAD to the Borrower on the date stated above. The Loan bears interest at the rate of 5.5% per annum, compounded monthly, calculated from the date of advance to the date of repayment in full. The interest rate stated above is intended to be at or above the CRA prescribed rate in force at the date of this Agreement, so as to avoid the deemed-interest-benefit rule in subsection 80.4(2) of the Income Tax Act. The Borrower acknowledges that the prescribed rate is updated quarterly by the Canada Revenue Agency and that the interest rate may need to be adjusted upward if the prescribed rate increases above the stated rate during the term of the Loan.
2.
REPAYMENT TERMS
The Borrower shall repay the Loan in equal monthly instalments of principal and interest, with the final instalment due on or before the One-Tax-Year Deadline below. The total number of instalments is 24. Payments shall be made by pre-authorised debit from the Borrower's TD Canada Trust chequing account on the first business day of each month.
One-Tax-Year Deadline. The Borrower acknowledges that, regardless of the agreed instalment schedule, the Loan (including all accrued interest) MUST be repaid in full on or before 2027-12-31, being the end of the tax year of the Lending Corporation following the tax year in which the Loan was made (the "One-Tax-Year Deadline"). Failure to repay by the One-Tax-Year Deadline triggers the deemed-dividend treatment under subsection 15(2) of the Income Tax Act, with the entire outstanding balance included in the Borrower's income in the year the Loan was originally made — a tax cost that materially exceeds the interest cost of the Loan.
One-Tax-Year Deadline. The Borrower acknowledges that, regardless of the agreed instalment schedule, the Loan (including all accrued interest) MUST be repaid in full on or before 2027-12-31, being the end of the tax year of the Lending Corporation following the tax year in which the Loan was made (the "One-Tax-Year Deadline"). Failure to repay by the One-Tax-Year Deadline triggers the deemed-dividend treatment under subsection 15(2) of the Income Tax Act, with the entire outstanding balance included in the Borrower's income in the year the Loan was originally made — a tax cost that materially exceeds the interest cost of the Loan.
3.
SECURITY
The Loan is secured by a pledge of the Borrower's shares in the Lending Corporation, registered under the applicable Personal Property Security Act.
Specific security particulars:
Pledge of 250 Class A Common Voting shares of Maplewood Holdings Ltd. held by the Borrower (50% of the Borrower's total shareholding), registered under the Ontario Personal Property Security Act, R.S.O. 1990, c. P.10.
The Borrower undertakes to execute and deliver any further instruments reasonably required by the Lending Corporation to perfect the security interest in the relevant collateral, including (where applicable) any financing statement under the applicable Personal Property Security Act, any mortgage or charge under the applicable Land Titles or Land Registration Act, and any specific share-pledge instrument.
Specific security particulars:
Pledge of 250 Class A Common Voting shares of Maplewood Holdings Ltd. held by the Borrower (50% of the Borrower's total shareholding), registered under the Ontario Personal Property Security Act, R.S.O. 1990, c. P.10.
The Borrower undertakes to execute and deliver any further instruments reasonably required by the Lending Corporation to perfect the security interest in the relevant collateral, including (where applicable) any financing statement under the applicable Personal Property Security Act, any mortgage or charge under the applicable Land Titles or Land Registration Act, and any specific share-pledge instrument.
4.
DEFAULT AND ACCELERATION
An "Event of Default" occurs if: (a) the Borrower fails to pay any amount due under this Agreement within 15 days of the due date; (b) the Borrower becomes insolvent, makes an assignment in bankruptcy, has a receiver appointed over any of the Borrower's assets, or becomes the subject of any proceeding under the Bankruptcy and Insolvency Act; (c) the Borrower ceases to be a shareholder of the Lending Corporation; (d) the Borrower breaches any other material term of this Agreement and fails to cure within 30 days of written notice from the Lending Corporation; or (e) the Borrower's death.
Acceleration. On the occurrence of an Event of Default, the Lending Corporation may, by written notice to the Borrower, declare the entire outstanding principal of the Loan and all accrued and unpaid interest immediately due and payable, without further notice or demand. The Lending Corporation may then exercise all of its remedies under this Agreement, the security documents, the common law of contract, and the law of equity, including without limitation enforcement of any security, action for the debt, and (where the loan amount has been deemed a dividend under s. 15(2)) collection of any tax-related grossed-up amount from the Borrower.
Acceleration. On the occurrence of an Event of Default, the Lending Corporation may, by written notice to the Borrower, declare the entire outstanding principal of the Loan and all accrued and unpaid interest immediately due and payable, without further notice or demand. The Lending Corporation may then exercise all of its remedies under this Agreement, the security documents, the common law of contract, and the law of equity, including without limitation enforcement of any security, action for the debt, and (where the loan amount has been deemed a dividend under s. 15(2)) collection of any tax-related grossed-up amount from the Borrower.
5.
CRA SUBSECTION 15(2) COMPLIANCE RECITAL
The Lending Corporation and the Borrower expressly record that this Agreement is intended to qualify for the bona-fide-commercial-terms exception under subsection 15(2.4) of the Income Tax Act, and to avoid the deemed-dividend treatment under subsection 15(2). The Parties confirm:
(a) the Loan is being made on terms substantially similar to those on which the Lending Corporation would lend to an arms'-length third party with comparable creditworthiness (see the Bona Fide Commercial Terms Schedule below where included);
(b) the interest rate stated in Article 1 is at or above the CRA prescribed rate published quarterly under Regulation 4301 of the Income Tax Regulations, so as to avoid the deemed-interest-benefit rule in subsection 80.4(2);
(c) the Loan is fully documented in writing, signed and dated, and the Lending Corporation will record the Loan as a current asset in its accounting records;
(d) the Loan will be REPAID IN FULL on or before 2027-12-31, being on or before the end of the tax year of the Lending Corporation following the tax year in which the Loan was made (the "One-Tax-Year Deadline");
(e) the Parties accept that the bona-fide-commercial-terms exception is fact-specific, and that if the CRA later determines that the Loan does not satisfy the exception, the deemed-dividend treatment under s. 15(2) will apply with the consequences described in Article 2 above.
(a) the Loan is being made on terms substantially similar to those on which the Lending Corporation would lend to an arms'-length third party with comparable creditworthiness (see the Bona Fide Commercial Terms Schedule below where included);
(b) the interest rate stated in Article 1 is at or above the CRA prescribed rate published quarterly under Regulation 4301 of the Income Tax Regulations, so as to avoid the deemed-interest-benefit rule in subsection 80.4(2);
(c) the Loan is fully documented in writing, signed and dated, and the Lending Corporation will record the Loan as a current asset in its accounting records;
(d) the Loan will be REPAID IN FULL on or before 2027-12-31, being on or before the end of the tax year of the Lending Corporation following the tax year in which the Loan was made (the "One-Tax-Year Deadline");
(e) the Parties accept that the bona-fide-commercial-terms exception is fact-specific, and that if the CRA later determines that the Loan does not satisfy the exception, the deemed-dividend treatment under s. 15(2) will apply with the consequences described in Article 2 above.
6.
ANTI-AVOIDANCE WARNING — "SERIES OF LOANS AND REPAYMENTS"
The Borrower expressly acknowledges the anti-avoidance principle applied by the Canada Revenue Agency and the Tax Court of Canada in Whaley v The Queen, 2024 TCC 53, and the related jurisprudence: where a shareholder repays a loan near the One-Tax-Year Deadline and the Lending Corporation makes a new loan of similar amount shortly thereafter, the repayment may be treated as ineffective and the original loan as never having been repaid — triggering the s. 15(2) deemed-dividend rule on the original loan. The Borrower undertakes that any repayment of this Loan will be intended as a genuine, final repayment, and not as part of a coordinated cycle of repayments and new loans designed to defer the s. 15(2) consequence. The Borrower further undertakes to consult with the Lending Corporation's tax advisor before any new loan from the Lending Corporation within twelve (12) months after the repayment of this Loan.
7.
BONA FIDE COMMERCIAL TERMS SCHEDULE
The Parties record the following commercial-comparison evidence supporting the bona-fide commercial nature of the Loan for the purposes of subsection 15(2.4):
Comparable arms'-length market rate: 6.25% per annum (the prevailing rate for an unsecured commercial term loan of the same principal and term as the Loan).
Comparable arms'-length term: 24 month(s) (the prevailing term for a commercial loan of the same principal and security profile).
Documentation and security: the Loan is documented in writing (this Agreement), recorded in the Lending Corporation's accounting records, and secured to the same extent as a comparable commercial loan would be (see Article 3 above).
Repayment schedule: the Loan is subject to a defined repayment schedule (see Article 2 above), and the One-Tax-Year Deadline applies regardless of the agreed instalment cycle.
Additional commercial-comparison notes:
The comparable arms'-length market rate is sourced from the Bank of Canada prime business loan rate (5.45% as at June 2026) plus a typical small-business spread of 80 basis points, yielding a comparable rate of 6.25%. The agreed rate of 5.5% reflects the Lending Corporation's assessment of the Borrower's strong credit profile (verified annual income CAD 240,000, additional collateral provided through share pledge, and existing shareholder relationship).
The Parties acknowledge that the bona-fide-commercial-terms test is applied by the CRA in light of all the facts at the time the Loan was made (see Watts v The Queen, 2023 TCC 11) and that this schedule is intended to support — but does not guarantee — qualification under subsection 15(2.4).
Comparable arms'-length market rate: 6.25% per annum (the prevailing rate for an unsecured commercial term loan of the same principal and term as the Loan).
Comparable arms'-length term: 24 month(s) (the prevailing term for a commercial loan of the same principal and security profile).
Documentation and security: the Loan is documented in writing (this Agreement), recorded in the Lending Corporation's accounting records, and secured to the same extent as a comparable commercial loan would be (see Article 3 above).
Repayment schedule: the Loan is subject to a defined repayment schedule (see Article 2 above), and the One-Tax-Year Deadline applies regardless of the agreed instalment cycle.
Additional commercial-comparison notes:
The comparable arms'-length market rate is sourced from the Bank of Canada prime business loan rate (5.45% as at June 2026) plus a typical small-business spread of 80 basis points, yielding a comparable rate of 6.25%. The agreed rate of 5.5% reflects the Lending Corporation's assessment of the Borrower's strong credit profile (verified annual income CAD 240,000, additional collateral provided through share pledge, and existing shareholder relationship).
The Parties acknowledge that the bona-fide-commercial-terms test is applied by the CRA in light of all the facts at the time the Loan was made (see Watts v The Queen, 2023 TCC 11) and that this schedule is intended to support — but does not guarantee — qualification under subsection 15(2.4).
8.
STRUCTURED REPAYMENT TABLE
The Loan shall be repaid on the following structured monthly schedule, with each instalment comprising principal and accrued interest:
First instalment due: 2026-07-01.
Instalment amount: 3,308.00 CAD (principal and interest combined).
Number of instalments: 24.
Final instalment: due on or before the One-Tax-Year Deadline stated in Article 2 above, with any remaining balance and accrued interest payable in full on that date.
Each instalment shall be applied first against accrued interest and then against principal. The Borrower may prepay any amount of principal at any time, without penalty. The Lending Corporation shall provide the Borrower with a running statement of account on each anniversary of this Agreement and on request, showing the outstanding principal balance, accrued interest, and remaining instalments.
First instalment due: 2026-07-01.
Instalment amount: 3,308.00 CAD (principal and interest combined).
Number of instalments: 24.
Final instalment: due on or before the One-Tax-Year Deadline stated in Article 2 above, with any remaining balance and accrued interest payable in full on that date.
Each instalment shall be applied first against accrued interest and then against principal. The Borrower may prepay any amount of principal at any time, without penalty. The Lending Corporation shall provide the Borrower with a running statement of account on each anniversary of this Agreement and on request, showing the outstanding principal balance, accrued interest, and remaining instalments.
9.
CORPORATE RESOLUTION AUTHORISING THE LOAN
The Loan is authorised by a resolution of the directors of the Lending Corporation dated 2026-06-10, passed in compliance with section 20 of the Business Corporations Act (Ontario), R.S.O. 1990, c. B.16. The Parties record the following:
Directors present at the meeting (or signing the written resolution):
Diana Khaledi (President, CEO and Director — abstained from voting on the Loan, given material interest as Borrower).
Reza Farhadi (CFO and Director — voted in favour).
Marcus Brooks (Independent Director — voted in favour).
Solvency-test confirmation. The directors of the Lending Corporation confirm that, at the date of the resolution authorising the Loan: (a) there are no reasonable grounds for believing that the Lending Corporation is, or after granting the Loan would be, unable to pay its liabilities as they become due; and (b) the realisable value of the Lending Corporation's assets, after granting the Loan, exceeds the aggregate of its liabilities and stated capital of all classes — satisfying the two-part solvency test required by section 20 of the Business Corporations Act (Ontario), R.S.O. 1990, c. B.16.
The directors' resolution authorises the Loan on the specific terms set out in this Agreement, including the principal amount, interest rate, security and repayment schedule. Any material variation of those terms requires a further directors' resolution.
Directors present at the meeting (or signing the written resolution):
Diana Khaledi (President, CEO and Director — abstained from voting on the Loan, given material interest as Borrower).
Reza Farhadi (CFO and Director — voted in favour).
Marcus Brooks (Independent Director — voted in favour).
Solvency-test confirmation. The directors of the Lending Corporation confirm that, at the date of the resolution authorising the Loan: (a) there are no reasonable grounds for believing that the Lending Corporation is, or after granting the Loan would be, unable to pay its liabilities as they become due; and (b) the realisable value of the Lending Corporation's assets, after granting the Loan, exceeds the aggregate of its liabilities and stated capital of all classes — satisfying the two-part solvency test required by section 20 of the Business Corporations Act (Ontario), R.S.O. 1990, c. B.16.
The directors' resolution authorises the Loan on the specific terms set out in this Agreement, including the principal amount, interest rate, security and repayment schedule. Any material variation of those terms requires a further directors' resolution.
10.
GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, including the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.). The Parties attorn to the exclusive jurisdiction of the courts of Ontario for all matters arising out of this Agreement.
11.
EXECUTION AND WITNESSING
This Agreement may be signed in counterparts, including by electronic signature, each of which is deemed an original and all of which together constitute one and the same Agreement. The signature of the Borrower is witnessed by Hannah Reilly of 142 Cottingham Street, Toronto, ON M4V 1B9, who is not a party to this Agreement, supporting the bona-fide-commercial-terms test by confirming the genuineness of the Borrower's signature.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated.
LENDING CORPORATION
Reza Farhadi
Chief Financial Officer and Director
Maplewood Holdings Ltd.
Date: ____________________
BORROWER SHAREHOLDER
Diana Khaledi
Date: ____________________
WITNESS
Hannah Reilly
Date: ____________________
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What Is a Shareholder Loan Agreement?
A Shareholder Loan Agreement is a written contract between a Canadian corporation and one of its shareholders (or a person related to a shareholder) documenting the terms of a loan made by the corporation. In Canada, shareholder loans are subject to specific Income Tax Act rules that make written documentation and proper terms essential — without them, the entire loan can be treated as a dividend and taxed in the year the loan was made.
The most important rule is Income Tax Act subsection 15(2): a shareholder loan must be repaid in full by the end of the tax year of the Lending Corporation FOLLOWING the year in which the loan was made (the "One-Tax-Year Deadline"). If repayment is even one day late, the entire principal is deemed a dividend in the year the loan was originally made — typically a tax cost of 25-30% of the principal, payable by the Borrower. This is the most expensive single tax trap in Canadian corporate-shareholder practice.
The s.15(2.4) bona-fide-commercial-terms exception provides relief — but only if the loan is on terms substantially similar to those on which the corporation would lend to an arms'-length third party (proper documentation, market interest rate, defined repayment schedule, adequate security). The s.80.4(2) deemed-interest-benefit rule adds a second layer: if the loan interest rate is below the CRA prescribed rate (updated quarterly), the difference is deemed a taxable benefit. This template addresses all three rules in a single integrated agreement.
What's Covered in This Template
Our Shareholder Loan Agreement template covers every element a Canadian corporate-tax lawyer would expect.
Lending Corporation Identification
Legal name, registered office, incorporating Act (CBCA / OBCA / ABCA / BCBCA), governing province, FISCAL YEAR-END (critical for the One-Tax-Year Deadline computation).
Borrower Shareholder Identification
Full legal name, address, percentage shareholding, role at the corporation.
Loan Principal & Interest
Principal amount, loan date, annual interest rate (set at or above the CRA prescribed rate), compounding frequency.
Repayment Terms
Form of repayment (monthly / quarterly instalments / lump sum / on demand), number of instalments, One-Tax-Year Deadline date, payment method.
Security
Unsecured / promissory note / share pledge (PPSA-registered) / real-property charge / general security agreement.
Default & Acceleration
Events of default (missed payment, insolvency, cessation as shareholder, breach, death), grace period, acceleration on default.
CRA s.15(2) Compliance Recital (Expert)
Express recital of the One-Tax-Year Deadline + s.15(2.4) bona-fide-commercial-terms qualification + s.80.4(2) prescribed-rate alignment.
Anti-Avoidance Warning (Expert)
Whaley v The Queen (2024 TCC 53) "series of loans and repayments" acknowledgment.
Bona Fide Commercial Terms Schedule (Expert)
Comparable arms'-length market rate + term + commercial rationale — auditable evidence for the s.15(2.4) test.
Structured Repayment Table (Expert)
First instalment date + frequency + instalment amount + running balance.
Corporate Resolution (Expert)
CBCA s.44 / OBCA s.20 / ABCA s.45 / BCBCA s.195 directors' resolution + two-part solvency test confirmation.
How to Create Your Shareholder Loan Agreement
Follow these steps to draft an agreement that survives CRA audit and the s.15(2) deemed-dividend trap.
- 1
Calculate the One-Tax-Year Deadline FIRST
If your corporate fiscal year ends 31 December 2026 and the loan is made 15 June 2026, the loan must be repaid by 31 December 2027 — NOT 15 June 2027. Get this date wrong and the entire principal is deemed a dividend.
- 2
Set the Interest Rate at or Above the CRA Prescribed Rate
The CRA publishes the prescribed rate quarterly. Q1 2026 was 3%; recent quarters have been 5-6%. If the loan rate is below the prescribed rate in any quarter, the difference is deemed a taxable benefit to the Borrower under s.80.4(2).
- 3
Pick a Realistic Repayment Form
Monthly or quarterly instalments are the most defensible (a defined schedule is the single strongest s.15(2.4) factor). On-demand loans are the riskiest — they typically fail the s.15(2.4) test on CRA audit.
- 4
Add Security Where Possible
Real-world commercial lenders almost always require security. A share pledge or general security agreement (both PPSA-registered) materially strengthens the s.15(2.4) bona-fide-commercial-terms test.
- 5
Add the CRA Compliance Recital (Expert)
A documented CRA compliance recital is the strongest defence on a CRA audit. Records the s.15(2) deadline, the s.15(2.4) qualification, the s.80.4(2) prescribed-rate alignment, and the anti-avoidance acknowledgment.
- 6
Document the Bona Fide Commercial Comparison (Expert)
Bank of Canada prime + small-business spread = comparable market rate. Document this in the Bona Fide Commercial Terms Schedule. Watts v The Queen (2023 TCC 11) treats commercial-comparison evidence as a key factor.
- 7
Pass the Directors' Resolution Under CBCA s.44 / OBCA s.20 (Expert)
Financial assistance from a corporation to its shareholder requires a directors' resolution + two-part solvency test confirmation. Without it, the loan can be set aside as ultra vires and the approving directors can be personally liable. If a Borrower is also a director, they must ABSTAIN.
- 8
Have All Parties Sign Within the Same Tax Year as the Loan
A signed and dated agreement is one of the s.15(2.4) bona-fide factors. Sign before or at the time of the loan advance — not retroactively after a CRA audit notice.
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Legal Considerations
Shareholder loans are governed by the federal Income Tax Act and the federal/provincial business corporations Acts.
This template is for informational purposes only and does not constitute legal or tax advice. Shareholder loans have significant tax consequences for both the Lending Corporation and the Borrower. Consult a qualified Canadian tax lawyer and accountant before signing, particularly where: the loan amount exceeds CAD 100,000; the Borrower is a non-resident; the corporation has multiple shareholders with different proportions; the loan is intended to fund a personal investment; or the corporation has limited liquidity.
Reviewed for Canadian federal Income Tax Act + common-law-province requirements
Income Tax Act s.15(2) — The Deemed-Dividend Trap
Subsection 15(2) of the Income Tax Act provides that a loan from a corporation to a shareholder (or to a person related to a shareholder) is included in the shareholder's income in the year the loan was made, UNLESS the loan is repaid by the end of the tax year of the Lending Corporation following the year in which the loan was made (the "One-Tax-Year Deadline"). The deemed-dividend treatment is mechanical — if the deadline is missed by even one day, the entire principal is included in income, with no grace period and no discretion. This is the single most expensive tax trap in Canadian corporate-shareholder practice.
Income Tax Act s.15(2.4) — Bona Fide Commercial Terms Exception
Subsection 15(2.4) provides relief from s.15(2) where the loan satisfies the bona-fide-commercial-terms exception. The four key factors are: (a) the loan is on terms substantially similar to those on which the Lending Corporation would lend to an arms'-length third party with comparable creditworthiness; (b) the interest rate is at or above the CRA prescribed rate; (c) the loan is fully documented in writing, signed, dated, and recorded in the Lending Corporation's accounting records; and (d) the loan is subject to a defined, dated repayment schedule. The exception is fact-specific (see Watts v The Queen, 2023 TCC 11) — a documented commercial-comparison schedule is the strongest evidence.
Income Tax Act s.80.4(2) — Deemed Interest Benefit
Subsection 80.4(2) deems the shareholder to have received a taxable benefit equal to the notional interest at the CRA prescribed rate minus the actual interest paid (within 30 days of the end of the year). The CRA prescribed rate is updated quarterly under Regulation 4301 of the Income Tax Regulations. To avoid the deemed benefit, the loan rate must be at or above the prescribed rate for every quarter the loan is outstanding. Where the prescribed rate increases during the term, the agreement should provide for an upward adjustment of the loan rate.
Whaley v The Queen — "Series of Loans" Anti-Avoidance
In Whaley v The Queen, 2024 TCC 53, the Tax Court applied the long-standing CRA anti-avoidance principle that a coordinated cycle of loan repayments and new loans of similar amount near the One-Tax-Year Deadline can be treated as a sham — the CRA can deem the original loan as never having been repaid, triggering s.15(2) on the original loan principal. The anti-avoidance acknowledgment in the Expert recital is a strong defence against this argument.
CBCA s.44 / OBCA s.20 — Financial Assistance to Shareholders
Section 44 of the CBCA (federal), section 20 of the OBCA (Ontario), section 45 of the ABCA (Alberta) and section 195 of the BCBCA (British Columbia) all require that a corporation's loan to its shareholder satisfy a two-part solvency test: (a) there are no reasonable grounds for believing that the corporation is, or after granting the loan would be, unable to pay its liabilities as they become due; and (b) the realisable value of the corporation's assets, after granting the loan, exceeds the aggregate of its liabilities and stated capital. The directors approving the loan can be personally liable if the solvency test is not satisfied. The corporate-resolution clause in the Expert section records the directors' resolution and the solvency confirmation.
CRA Income Tax Folio S3-F1-C2
CRA Income Tax Folio S3-F1-C2 (Deemed Interest Benefit on Shareholder Loans and Debts) is the operative interpretive guidance on the s.80.4(2) deemed-interest-benefit rule. The Folio addresses the timing of interest payments (within 30 days of the end of the year), the calculation of the notional benefit, the treatment of loans denominated in foreign currency, and the application to series of loans. Practitioners should review the Folio annually as the CRA updates it periodically.
Quebec — Excluded From This Template
Quebec is governed by the Civil Code of Québec and the Business Corporations Act (Québec). The Quebec regime differs in several material respects from the common-law provinces, particularly on financial-assistance rules and security registration (Quebec uses the Register of Personal and Movable Real Rights — RDPRM — rather than the PPSA). A separate Quebec-specific shareholder loan template will follow in a future sprint.
Frequently Asked Questions
Create Your Shareholder Loan Agreement Now
Build a CRA s.15(2)-compliant, audit-defensible shareholder loan agreement in minutes. The Free version produces a self-executing loan agreement with corporation + borrower + principal + interest at or above the CRA prescribed rate + repayment schedule + security + default + acceleration. Upgrade to Expert to add the CRA s.15(2) compliance recital with the One-Tax-Year Deadline + s.15(2.4) bona-fide qualification + s.80.4(2) prescribed-rate alignment, the Whaley v The Queen anti-avoidance acknowledgment, the bona-fide commercial-terms schedule comparing the loan to an arms'-length commercial alternative, the structured repayment table with running balance, and the CBCA s.44 / OBCA s.20 directors' resolution with two-part solvency-test confirmation.
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