§ 18442 Loans On Capital Security Prohibited

• •A company that lends money can't use its own money or shares as a guarantee for a loan.
• •This rule applies to the company itself, its parent company, or any related companies.
• •The company can't promise to pay someone else's debt using its own money or shares as backup.

A bank wants to lend money to a friend and says, 'If he can't pay you back, I'll give you some of my own shares in the bank.'

This is not allowed. The bank can't use its own shares or money to guarantee the loan.