Legal Question in Real Estate Law in California

Re: Corporate Law

Most of the things you ask about would be answered "no." I don't think you are starting out with a very accurate view of what personal guarantees of corporate obligations are all about.

First, one does not become a guarantor of a corporate debt by holding a particular office, such as CFO (or President). You become a guarantor by signing a personal guarantee.

Next, having the individual's credit report run, and providing that information to the lender or supplier extending credit, also does not create a personal guarantee. Again, a personal guarantee results from the guarantor signing a piece of paper, or more likely, several pieces of paper.

(This is not to say that corporate officers can never become liable for corporate debts involuntarily! That can happen, but usually requires gross mismanagement of the corporation, or fraud.)

Finally, resignation of a personal guarantor from the business usually HAS NO EFFECT on the guarantee! The guarantor will remain on the hook whether he is affiliated with the borrower/debtor or not. This outcome can be modified or changed if the guarantee, when written or through a subsequent modification, so provides; however, they rarely do, because the guarantee would lose its value.

So, to summarize, when the loan is made and the guarantor signs, the corporation becomes the debtor and the individual becomes the guarantor. The corporation is primarily liable. If the corporation defaults, the lender can enforce the repayment obligation against the guarantor. The guarantor's status as an officer is immaterial, both at the time the loan is made and at the time the guarantor is asked to make good because the corporation has defaulted. Many times loans to new corporations are guaranteed by persons who are not owners, directors or officers of the corporation. The only sure way for a guarantor to get off the hook on a guarantee is for the guaranteed obligation to be satisfied, i.e. paid.

Other terms can be negotiated between the parties - it's all a matter of contract - but lenders usually expect to have the guarantor completely locked into his role.

Re: Corporate Law

No. A personal guarantor means he is personally liable for the debt if it is not paid. His relationship to the corporation has nothing to do with it. If the lender is willing to release him from the loan, you will have to negotiate that with them before taking the loan.