Companies (other than exempt private companies) are prohibited from granting loans or entering into any guarantee in relation to loans made to their directors or the directors of their related companies (section 162(1) of the Companies Act), except in circumstances prescribed in the statutory provision.
The director that authorised the loan or guarantee shall be guilty of an offence punishable with a fine up to $20,000 or with imprisonment for up to 2 years (section 162(4) of the Companies Act).
The director may also be made to indemnify the company for any loss suffered as a result of the unauthorised grant.
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