We wanted to add a second director to the ASIC Registry for our company. Having just one director means no backup in an emergency, so adding a second would reduce our company’s risk profile.
The company has a bank loan secured by a mortgage on our office, and has been making the required payments for over a year. The loan documents say that the bank must approve in writing any change to the directors of the company.
So I rang the bank to find out the process.
Sam at the call centre agrees that an additional director will reduce the loan’s risk. She says I will need to go to local branch to complete a form, no need for an appointment. All, good, I thought. I’ll go on Friday. But wait – COVID lockdown.
So I rang the bank again. They said someone would email the form to me immediately. The nice lady on the phone agreed that adding a director couldn’t possibly subtract any of their security, and although she wasn’t familiar with the process, she expected it would be easy.
Remember this was the bank’s requirement. A clause in their loan agreement said our loan would be in default if we changed directors without their “prior written consent”. So we figured they must have a process to grant that consent. Silly us.
So after a week without an email, I rang the bank again. Apparently we were the first to pay so much attention to this requirement, and the bank didn’t actually have any process for granting a written consent. But I was told to expect an email that very afternoon.
Sooo … a week later and still no email, I rang the bank again. The bank’s own form required their written consent – how it could be so hard to get a form to request that consent?
Third time’s a charm – an email arrived. The form turned out to be an entire loan application form and required the company’s current financial position, financial statements for the past financial year, ATO login details, plus tax returns for both directors and statements of their financial position as well.
Remember, this was to reduce risk in a loan the bank had already approved a year earlier.
So I rang the bank one last time. “Why do you need us to go through the entire loan application process when we are proposing to reduce your risk on a loan you’ve previously approved?”
“In case it’s all gone to shit.”
“You mean there’s a chance you might not even approve the loan you’ve already approved once before and that we’ve been making all the payments on for a year?”
“Yes.”
“And all this because you don’t have any other way for us to comply with a requirement that you invented?”
“Umm … yes.”
We decided to stick with one director.
