• Resigned as a director in April 2018, but bank sending notices for recovery of loans

Hi,

I have been a director of a company from 2007 to April 2018 with only 1% share holding. During this period the company took various loans from banks and FIs. Now in Dec 2018 the banks are sending notices for recovery of loans to me as one of the directors, though I have resigned in April 2018, stating that the company has failed to pay the loans and interest.

How to respond to the notice and proceed? And what is my liability here. Do I have to pay? No personal asset was pledged.
Asked 5 months ago in Business Law from Greater Noida, Uttar Pradesh

Dear Client,

For loan taken in your tenure, liability still persists. No recovery from personal assets. Was those loans were  secured loan or taken in personal capacity or taken by company.

Company being, legal person have separate entity, recovery if any shall be made from company assets and not from director, you are not personally liable for paying the company's debts and if the limited company does not pay its debts and a banks takes court action, only the company assets are at risk.

Yogendra Singh Rajawat
Advocate, Jaipur
9806 Answers
8 Consultations

4.6 on 5.0

if you are a director (or acting as a director), you are not personally liable for paying the company's debts. This means that if the limited company does not pay its debts and a creditor takes court action, only the company assets are at risk. You are not liable to pay the debt. 

Mohammed Mujeeb
Advocate, Hyderabad
7067 Answers
3 Consultations

4.5 on 5.0

Still company being separate corporate entity, no recovery from director except if loan amount misappropriated by director - still no recovery by bank but company. - no liability.

Yogendra Singh Rajawat
Advocate, Jaipur
9806 Answers
8 Consultations

4.6 on 5.0

You are not personally liable to repay company dues 

 

2) I presume you have not given any personal guarantee for repayment of loan 

Ajay Sethi
Advocate, Mumbai
61317 Answers
3722 Consultations

5.0 on 5.0

If no personal guarantee was there in that case you can reply to the notice stating that you have resigned from the company by due procedure and now no more a director therefore not liable for the day to day workings and loan liabilities of company.

Shubham Jhajharia
Advocate, Ahmedabad
15317 Answers
63 Consultations

5.0 on 5.0

 

you would not be sentenced to imprisonment

 

you have not given any personal guarantee 

 

 

 

Ajay Sethi
Advocate, Mumbai
61317 Answers
3722 Consultations

5.0 on 5.0

The bank will recover loan from the assets of the guarantor if the company has no assets the bank always give secured loan and there must be mortgage or guarantee with the bank.

There wont be any legal hassle to you if you are not guarantor and further resigned legally from the company.

Shubham Jhajharia
Advocate, Ahmedabad
15317 Answers
63 Consultations

5.0 on 5.0

A  Director who has resigned shall be liable even after his/her resignation for any offenses which occurred during his/her tenure as Director of the Company.

After a Director has tendered his/her resignation and the Board has accepted the resignation, the Director cannot be held liable for liabilities incurred by the company after the date of acceptance of resignation. However, a Director who has resigned shall be liable even after his/her resignation for any offenses which occurred during his/her tenure as Director of the Company.

 

You may engage the services of an advocate and give a suitable reply on the basis of your involvement in the loans relying on the documents in yor possession to defend your interests

At this point your liabilities are over as far as the company is concerned. You can only be held responsible for things that happened (or did not happen) during the time of your directorship. As long as you did not act outside of the law whilst in your post as director, you are free to walk away from the company for good..

T Kalaiselvan
Advocate, Vellore
51445 Answers
612 Consultations

5.0 on 5.0

The banks will follow due process of law to recover the loan.

If you are not personally liable and have not pledged any immovable asset to the bank on behalf of the company, then you do not have to be worried on that aspect, in any case there is no question of imprisonment because it is a civil case.

However, if you have signed a personal guarantee for a company loan, credit card, overdraft, or any other finance agreement. By signing a personal guarantee you are removing the protection limited liability offers. Any personally guaranteed debt is the responsibility of the individual who acted as guarantor until the money is paid back in full. This means that if the company is unable to keep up with the agreed repayments, the guarantor must step in and pay this money back using their personal funds. Resigning as director does not invalidate a personal guarantee.

T Kalaiselvan
Advocate, Vellore
51445 Answers
612 Consultations

5.0 on 5.0

Dear,

        You face liability up to  your share of holding in company.

         Loan taken by company and bank not sanctioned money without pledged any

         type of assets of company.

         If company has no assets now then it's not your problem. 

Tarun Agarwal
Advocate, Jaipur
633 Answers
2 Consultations

4.9 on 5.0

If you have signed a director’s personal guarantee on any loan, lease or contract, you will be made personally liable for the debt if the company is unable to pay.

Mohammed Mujeeb
Advocate, Hyderabad
7067 Answers
3 Consultations

4.5 on 5.0

1. company is a separate legal entity distinct from its shareholders (which includes the directors)

2. loan was taken by company and not by director in his personal capacity

3. so bank cannot issue recovery notices to you, moreso when you are no more a director

4. the remedy of the bank is to take out insolvency proceedings against the company and its assets, if any

Yusuf Rampurawala
Advocate, Mumbai
3883 Answers
16 Consultations

5.0 on 5.0

1. IF the Loan Documents were signed by you, as the THEN in-charge Director, THEN even after resignation, you would be liable for the repayment, subject to various parameters.

2. Issue a Legal Notice to the Bank/FI, that you have resigned and that ROC has accepted the resignation. Take letter from company, that your resignation is accepted without any pending liabilities on you.

Keep Smiling .... Hemant Agarwal

Hemant Agarwal
Advocate, Mumbai
1813 Answers
10 Consultations

5.0 on 5.0

you need to show that you dont have any connection with the said loans then only you can do the same. send a reply through advocate

Prashant Nayak
Advocate, Mumbai
8308 Answers
11 Consultations

4.8 on 5.0

Ask a Lawyer

Get legal answers from top-rated lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer