A corporation is an artificial person that is created by governmental action. The corporation exists in the eyes of the law as a person, separate and distinct from the persons who own the corporation (i.e., the stockholders). This means that the property of the corporation is not owned by the stockholders, but by the corporation. Debts of the corporation are debts of this artificial person, and not of the persons running the corporation or owning shares of stock in it. The shareholders cannot normally be sued as to corporate liabilities. However, in this guaranty, the stockholders of a corporation are personally guaranteeing the debt of the corporation in which they own shares.
Arizona Continuing Guaranty of Business Indebtedness By Corporate Stockholders is a legal document that serves as a binding agreement between a corporation's stockholders and a lender. This guaranty aims to secure a loan or line of credit provided to the corporation by guaranteeing the repayment of any outstanding debts or obligations in the event of default or non-payment by the corporation. Key terms associated with this legal agreement include Arizona, continuing guaranty, business indebtedness, corporate stockholders, and obligations. Let's dive deeper into the different types of Arizona Continuing Guaranty of Business Indebtedness By Corporate Stockholders: 1. Unlimited Continuing Guaranty: This type of guaranty covers all current and future debts or obligations incurred by the corporation, providing the lender with maximum security. It extends the guarantor's liability beyond the current indebtedness, making them accountable for any future financial commitments of the corporation as well. 2. Limited Continuing Guaranty: Unlike the unlimited guaranty, this type of guaranty places restrictions on the extent of the stockholder's liability. It specifies a maximum liability amount or a predetermined time frame during which the guarantor is responsible for the corporation's obligations. Once this limit is reached, the guarantor's responsibility ceases. 3. Rotating Continuing Guaranty: In certain cases, multiple stockholders may be involved in guaranteeing a corporation's indebtedness. A rotating continuing guaranty allows for the rotation of guarantor obligations between stockholders, determining the order in which they will be responsible for debt repayment. This type of guaranty can be designed to evenly distribute the burden among stockholders. 4. Conditional Continuing Guaranty: This type of guaranty comes into effect only under specific conditions. For example, it may state that the stockholders' liability will commence if the corporation fails to meet a certain financial ratio or breaches a particular covenant. Such conditional requirements protect the guarantors from unwarranted liability and align their obligations with the corporation's performance. An Arizona Continuing Guaranty of Business Indebtedness By Corporate Stockholders provides lenders with an added layer of security when providing funds to a corporation. By understanding the different types of guaranties available, both lenders and corporate stockholders can navigate their financial relationships more efficiently. However, it is crucial to consult with legal professionals experienced in Arizona corporate law to draft and execute these agreements accurately, considering the specific circumstances and desired protections.
