Effect of void agreement.
ADVOCATE TRILOK
(Querist) 07 October 2016
This query is : Resolved
Directors of a pvt ltd co entered into an agreement with a finance co seeking loan. However there is a condition in the agreement the said directors are personally liable.
Now the problem is there is default and original directors have changed.
1) Under the co law the directors can not take personal liability for the co. and
2) there are no permanent directors.
Since the liability is only against the company whether the liability against the directors can be termed as illegal and they are not liable.
Rajendra K Goyal
(Expert) 07 October 2016
The terms in the agreement can not be illegal till decided so by competent court. You have option to challenge the clauses.
Directors if signed the documents as guarantor of the loan, would be personally liable, who gave the guarantee to the loan.
rajeev sharma
(Expert) 07 October 2016
the answer to the quarry requires appreciation of loan document executed by the company.The director if entered into agreement in personal capacity are also liable for repayment of loan.From your quarry o understand that the directors who signed the loan document have retired and the new directors have not not signed any document with lender. In such circumstances no opinion o presumption may not be given
Kumar Doab
(Expert) 07 October 2016
It shall be certainly appropriate to show all such documents on record to a very able counsel.
The lender that has lended its good money shall defend its interest.
Guest
(Expert) 07 October 2016
How do you consider the agreement to be void?
adv.bharat @ PUNE
(Expert) 07 October 2016
Author need to explain the query raised by expert.
Kuummaar AS
(Expert) 08 October 2016
For proper advice in the matter, please inform exact contents of the clause in the agreement w.r.t. personal liability of directors.
Ms.Usha Kapoor
(Expert) 08 October 2016
A company is a seperate legal personality of its own which has legal veil. Once you lift the corporate veil if Directors go ultravires the articles of company or Memorandum o associations etc the courts make them personally liable for abusing their position as director of company using the name of the company. The court lifts the corporate VEIL AND THEN MAKES THEM PERSONALLY LIABLE IF THEY GO BEYOND THE POWERS CONFERRED ON THEM BY articles OF association.If you appreciate this answer please click the thank you button on my profile.
adv.bharat @ PUNE
(Expert) 08 October 2016
Agreed with expert opinion.
When director act beyond his power then he will be personally responsible for his own act.
Rajendra K Goyal
(Expert) 08 October 2016
Author,
Have you gone through the related loan documents? if so please state the related provisions of guarantee.
malipeddi jaggarao
(Expert) 08 October 2016
As Mr.Dhingra rightly pointed, how can you conclude that it is void agreement? The financial companies have their standard formats and they know how to bind the people. What exactly the clause that binds the directors personally? Come with full facts.
Kumar Doab
(Expert) 08 October 2016
The borrower applied for loan.
Got the loan.
Is under debt.
How can the agreement be void!
Guest
(Expert) 08 October 2016
It seems, when there is no willingness to repay loan, the documents are termed to be void, but not at the time of taking loan.
Rajendra K Goyal
(Expert) 08 October 2016
However, if we leave aside the agreements, generally the financial institutions can prove liability of borrowers / guarantors through many documents ie debit vouchers, cheques issued, deposit slips, ancillary agreements, application, arrangement and sanction letter, account statement and many other documents.
If director has signed as guarantor, the agreement is not void.
Rajendra K Goyal
(Expert) 08 October 2016
There is a difference, if director has signed on behalf of company only as per resolution passed by board of directors to execute loan documents on behalf of company, he may not be held liable, but Banks generally take personal guarantee of the directors while executing the documents of loan of company, in such case director in personal capacity can not escape from the liability, nor the agreement / guarantee is void.
Kumar Doab
(Expert) 08 October 2016
I shall prefer to concur with Expert Mr. Goyal and in specific last posts.
The only thing is that author has pressed on 'there are no permanent directors'.
The lender can stake charge on assets.
Kuummaar AS
(Expert) 09 October 2016
Advocate Trilok,
Why are you silent?
It is reiterated, for proper advice in the matter, please inform exact contents of the clause in the agreement w.r.t. personal liability of directors.
Kishor Mehta
(Expert) 10 October 2016
Sir/s,
The liability, personal or otherwise, depends entirely on the terms, conditions and covenants of the document of agreement.
It is a useless exercise for one's brain to try to offer sane and valid advice unless these are made known.
Good Luck,
Kishor Mehta
Guest
(Expert) 10 October 2016
I endorse the views of Shri Kishor Mehta.
Rajendra K Goyal
(Expert) 10 October 2016
Good conclusion by expert Kishor Mehta.
Kumar Doab
(Expert) 10 October 2016
The author has not posted the agreement/extracts, and has not responded.
If agreement has been examined by a very able counsel, the author may post that as well.
