Is a director’s loan to the company risky and how should it be documented?

Without documentation, your position is weak. A director's or shareholder's loan is treated as a debt owed to you, but on liquidation you rank as an unsecured creditor alongside others, and a liquidator may scrutinise the transaction, particularly if it looks like a disguised contribution of capital or a preference. To protect yourself, record the loan in a written agreement stating the amount, interest, repayment terms and whether it is repayable on demand. If you want priority, you can take a security interest over company assets and register it on the Personal Property Securities Register, although this needs advice and must be done properly. Also consider tax treatment, since interest and repayments may have consequences. Repaying yourself just before insolvency can be challenged by a liquidator.