President of company signs loan.....liable?

Money was borrowed from a bank by a corporation whose president negotiated the loan and signed the promissory note. On the first blank signature line of the note, the president wrote the name of the corporation. On the second such line, he signed his own name. The note was negotiated by the lending bank to the Federal Reserve Bank. The note was not paid when due and the Federal Reserve Bank sued the corporation and its president. The president claimed that he was not bound on the note because he did not intend to bind himself and because the money obtained by the loan was used by the corporation.

1.Is the president liable? Please explain.

2. How should such an individual sign a promissory note to best avoid potential individual liability?

President of company signs loan.....liable?

The board of directors must resolve to get this loan from that financial institution in advance, and that resolution must be recorded in the minutes of the board of directors meeting, and the Secretary must sign the resolution, and the Treasurer must have a copy of the resolution approving the loan to show the financial instituton.

1. It sounds like he co-signed for the corporation, in which case he would be liable, but that is very iffy. A corporate attorney should look at it.

2. The Treasurer (not the President), should sign for the loan as follows,

Mr. John J. Jones, Treasurer, XYZ corporation.

It is the treasurer's job, not the President's. The financial institution might accept the President's signature, but they are looking for ways to make the signer responbile for the loan.

Under no circumstances, should the treasurer of the corporation, sign for any loan that has a clause in it which states that the signer is personally responsble for the loan, and look carefully, because financial institutions will try to sneak that clause in there.

Now consider this:

A corporation hires you as the treasurer of the corporation. The board of directors resolves to get a $5,000,000 loan from the bank, and you sign for it, as treasurer of the corporation. Two months later, they fire you, and hire a new treasurer, and then default on the loan.

Do you think that the bank should go after you, the new treasurer, or the corporation?