Company avoid the loan agreement

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Question

Reynard and Swee Lim are the directors of ReLim Pty Ltd. Reynard, Swee Lim and Viktor are the three shareholders of the company.

Swee Lim is more finance focused and Reynard is the marketing person. Swee Lim approaches their bank, OCBC Bank Ltd on behalf of the company for a loan of $250,000.

Being more aware of the company's finances than Reynard she requested a loan of $300,000 given the state of the current economy in Melbourne. The company's internal procedures require the shareholders to approve any loans over $200,000. But in this case they did not do so.

The Bank requires the assets of the company as security for the loan and also Reynard and Swee Lim are to sign a personal guarantee in their own names for the company's debts being the loan amount and any outstanding interest and fees.

1. Advise Reynard and Swee Lim what are the consequences for them in signing the guarantee?

2. Is the loan agreement between the company and OCBC Bank Ltd valid or can the company avoid the loan agreement.

Reference no: EM133809358

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