Legal Question in Business Law in California

Re: Protection of personal assets

You can resign as secretary. Whether you should or not is a judgment call; there are duties and responsibilities, but remaining active in the corporation is a way to keep in touch with what's going on. I would not, however, recommend remaining in the secretary position as a nominal or figurehead person; that's the worst of both worlds, duties and responsibilities but no real opportunity to carry them out and no access to inside information.

Unfortunately, getting out of the guarantor position is not a matter of resigning; that you cannot do. Your responsibility should be discharged upon payment of the financing documents you signed. Do you have a copy? Hopefully, the guarantee is limited to that single transaction and is not a continuing guarantee of an open account. If it is, contact the creditor, dealer, supplier (and all of them) at once to terminate the guarantee (in writing) as to future transactions.

As to past transactions, it is possible that if they are motor vehicle deals, they fall under the Automobile Sales Finance Act, which is designed to protect buyers of motor vehicles from predatory financing practices by dealers and their banks and finance companies. It is found in the Civil Code at sections 2981 et seq. In particular, section 2983.35 requires that a cosigner must be given written notice of a delinquency by the primary borrower. Thus, make sure the dealer or lender is aware of your address.

Most dealers and lenders are smart enough to avoid violations of the Act, but if you are called upon to make good on a guarantee, have a lawyer look for possible violation including failure promptly to notify you under 2983.35.

Re: Protection of personal assets

This can potentially be a bad idea. You may be considered a responsible officer of the company. If so, you could be liable for the debts of the company should there be an issue. You could also be liable for unpaid taxes, especially employment taxes, of the company. By being a guarantor, you have placed all of your assets at risk, to the extent of any liabilities of the company. A business or corporate attorney could help you sort this out. You may want to review the balance sheet for the business, as well as an income (profit and loss) statement and the tax returns for the company.

Re: Protection of personal assets

Your question is a little late.

All of your assets and credit are on the line as a personal guarantor. Also, as secretary, you have a responsibility to oversee the books and records of the corporation.

The quick answer is you need to be actively involved in this business, to make sure that there is enough cash, and that the bills that you have guaranteed are paid first.

Re: Protection of personal assets

Too late to protect yourself from loan defaults and lawsuits. Good luck.