Kiritsis & Associates

 

How do New York corporation laws, deal with loans to directors, guarantees of director obligations?

Jul 14, 2021

Law Offices of John Kiritsis, Esq. Phone: 212-922-0005 

By: John Kiritsis, Esq., CPA, MBA, MS, JD, LL.M

 

The body of laws which basically dictate most legal issues involving the corporate inner affairs of New York business corporations, would invariably be the BCL (Business Corporation Laws).  The laws with regards to this topical area, may tend to be not only somewhat confusing or esoteric to comprehend, but they are subject to constant change.

 

For corporations formed after February 22, 1998, and for corporations formed before then if so provided in the certificate of incorporation, corporate loans may be made to directors and the corporation may guarantee director obligations if the board determines that the specific loan or guarantee benefits the corporation and either approves the specific transaction or has approved a general plan authorizing loans and guarantees. It should be noted that for all other corporations, the specific transaction must be approved by a shareholder vote, in which a majority of the shares entitled to vote constitutes a quorum, but shares of directors who are benefited by the transaction may not vote or be included in the determination of a quorum.

 

New York law tends to be quite unique with regards to this topical area of the law, and it stands with sharp contrast, when compared with the corresponding Delaware law provisions.

 

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