Foo - Legal question (co-signing for a business loan)
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07-13-11, 08:06 PM
These are all the details I have, and I know they are not complete, but can anyone tell me what's going on to any degree of accuracy?
My grandfather was one of five people to own Company A, after he passed away, the guy who ran it (who my grandfather said would eventually run it into the ground) asked for a loan from the bank. The bank said only if all 5 owners co-signed for the loan that he could get it. The guy talked my grandmother (who knows little about business) into co-signing and now the company has gone under.
The question: will the bank come after my grandmother personally for the money, or simply take over her shares of the company? What stipulates which way it goes? The loan was in the tune of $500,000 and here in Tulsa. Thanks for anyone in the know.
07-13-11, 08:13 PM
Did she legally become an owner after his passing?
07-13-11, 08:26 PM
Legal advice: See a contract lawyer, immediately.
I normally eschew lawyering up, but I think that in this case, that is exactly what I would do. Is anyone in your peer group a lawyer that you can talk with over a beer? If so, find out what your lawyer friends likes to drink and take a six pack over to their place. Also, ask your grandmother if she has a copy of whatever it is she signed for the lawyer to review.
07-13-11, 08:38 PM
What kind of Co. , S-Corp, LLC, Corp, DBA...
To many details - Just remember the bank is going to go after everyone and anyone...
07-13-11, 08:50 PM
I believe she did become the owner after passing. A lawyer is certainly going to be contacted shortly (this JUST came up), but was wondering if this was common enough to be common knowledge to any legally familiar person. My sister just divorced the go-to lawyer, and no one else has passed the bar. Not sure on the type of business, although it was some sort of manufacturing/machine shop thing. Thanks anyway.
07-13-11, 11:36 PM
Actual ownership in the company may not have been required (and thus might be irrelevant to your question) if the lender was satisfied with your grandmother's personal guarantee, if that's what she signed (and so she might be partially responsible, or perhaps for the full loan amount).
Sounds like a possibility of fraud that should be looked at, or something like misdealing among owners.
Even companies that go under sometimes have valuable assets (customer lists, intellectual property such as copyrights and trademarks, accounts receivable, product formulas, inventions) that co-owners may not accurately or truthfully reveal to other owners.
Bankruptcy (company, if not also personal) might be worthwhile to ask about.
Probably will be important potential tax consequences.
Your grandmother's exposure and rights can vary greatly by the type of legal entity involved, successor terms, and possibly probate or estate law.
IOW piece of cake.
Get thee to an attorney (and probably also accountant) pronto.
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