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Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
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Experience:  30 years of corporate, litigation and international law
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This question involves two Illinois not-for-profit corporations

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This question involves two Illinois not-for-profit corporations and their two presidents.
Corp V had a piece of real estate to sell to Corp C. A stipulation in the selling contract was that Corp C would pay the 'outstanding taxes'. One year of taxes (approx $9400) was due the first of July 2011. Real estate closing date approx two weeks later. Corp C did not have enough money to pay the taxes due two weeks before the signing and if not paid those taxes would be on the rolls of the Aug 2011 Cook County Tax Sale.
On his own, with no authorization from shareholders, the president of V made an agreement with the president of C that Pres V would pay the $9400 out of his personal funds and Pres C would repay him with a monthly payment.
One year later, only the first payment was made.

At the last Corp V shareholders meeting, a friend of the president made a motion to "reimburse Fred for the money he has lost." Motion passed 6-1 , I was the minority.

Can a corporation reimburse a corporate officer for a personal loss such as this?
To me it stinks to high heaven.
If illegal, unlawful or just plain wrong, what are my options? If illegal or unlawful, is this an IRS issue of an issue for Illinois authorities?

bizlaw :

What was done was not illegal or unlawful. What should have happened is that the loan should have been approved by the selling corp or made by the selling corp if that is what it was going to take to close the deal. The president making the loan did it to facilitate a sale the selling corporation wanted to accomplish. It would be appropriate for the corporation to reimburse the loan to the officer as the corporation is the one who benefited from it.

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