Exit agreement for a director so remaining directors cannot be held financially liable later
akash
(Querist) 31 October 2012
This query is : Resolved
Hello Experts,
I am one of the 3 directors of a Private Limited company. The business has not been doing well and one of the directors, who holds 50% of the share capital, wants to quit. He wants his entire investment back, which includes a Rs 8 lac loan which had a lock in period of 5 years as per the board resolution (year 2 currently running). The company does not have enough money yet to payback.
My question is- if the director agrees to keep the loan amount in the company for a regular interest and the company only pays back the share capital as of now, will the remaining directors be personally liable to pay back the loan (which has been given to the company, and not to the directors personally) in case the business has to be shut down next year? I would assume since its a Pvt Ltd company, the directors would have limited liability and only the assets of the company can be used.
Are there any clauses that need to be specifically put in the exit agreement with the outgoing director so that the remaining directors cannot be held personally liable for this loan on a future date if the business has to be shut down?
Thanks
Akash
Kuummaar AS
(Expert) 07 March 2013
Your question is- if the director agrees to keep the loan amount in the company for a regular interest and the company only pays back the share capital as of now ...
Please note the companies are governed by the provisions of Companies Act, 1956, which do not provide for paying back the share capital by any company. As such, the company cannot pay back share capital of the director.. Instead, other directors can buy those shares and have the same transferred in their respective names.
