CORPORATIONS-GENERAL EFFECT OF STATUTES PROHIBITING CORPORATE LOANS TO DIRECTORS, OFFICERS AND STOCKHOLDERS

Over the years a number of states have felt that loans by private corporations to their directors and stockholders should be regulated to protect the interests of creditors and, in many cases, stockholders. At present, twenty-two states have statutes which either absolutely prevent such loans or else limit their scope, and this number will probably increase. A typical statute may be found in New Jersey: "No corporation shall loan money to a stockholder or officer thereof. If any such loan be made the officers who make it, or assent thereto, shall be jointly and severally liable, to the extent of such loan and interest, for all the debts of the corporation until the repayment of the sum so loaned." Not only are there numerous variations among the statutes, but there are differences among their judicial interpretations.

The purpose of this comment is to consider the necessity for the statutes and to indicate the variations which may be encountered.