Legal Question in Business Law in California

Re: Corporate officer loan

The first question that's likely to come up during any attempt to re-collect, whether through mediation or lawsuit, is whether the money was lent to the company, or was an equity investment. Lacking any express or implied promise to repay, the corporation might argue that the money was an investment, and that you may be entitled to some stock, but not to repayment.

You will also face problems of proof of the principal amount, the interest rate, the maturity (due) date, and so forth. If you can't show that the loan is past due, that might be an obstacle. There is also a possible statute of limitations problem; oral agreements are generally not enforceable after two years, but that's from the date the obligation comes due, not the time the agreement was made or the money lent.

There may be an issue with the authority of the company to borrow from you; if lending the company money was your idea, the company might argue that you made a gift that it isn't obligated to repay, or some similar argument based on lack of a proper corporate decision authorizing the borrowing.

However, despite all these obstacles, you do seem to have some proof of making a loan, or some kind of payment, and the corporation's books also ought to reflect receipt of the money and, on the debit side of the ledger, whether it treated the money as payment of a debt, a loan, or an equity investment. Those books and records would be subject to discovery.

If you can prove that you made a loan, and that it is now due, you should be able to win a lawsuit and get a judgment; the next question will be whether the corporation can pay.

Re: Corporate officer loan

In my previous answer, I should have mentioned the Statute of Frauds as an additional possible defense the corporation may raise; this is the law or set of laws that require certain kinds of contracts to be in writing, or at least the existence of the (oral) contract to be revealed in writing(s) signed for the corporation. The Statute of Frauds is riddled with exceptions, and the endorsement of your checks (for example) might be sufficient to meet the need for a writing.