Can the company also be made responsible to pay back the loan itself, as well as the interest?
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More or less, if the individual owns 100% of the company after the purchase, then there is not a lot that an owner cannot have the company do.
The caveat is that the company cannot default on their own loans or creditors that existed prior to the purchase. So a company cannot pay the owners loans or interest and then not pay the company’s loans and interests. If that happens, the other creditors will sue and the courts will likely require that the company loans be paid back first before any money is returned to the owner.
If someone wholly owns a company, they can have the company do what they want (other than breaking the law or defrauding others). That is what ownership means.
It does sound strange, but it makes some legal sense if you break it into two pieces.
Think about buying a house. When you buy a house, you put down a certain amount of money and the bank gives you a loan for the rest using the house as collateral. The thought being they can take the house if you ever fail to pay them back and it will be valuable enough to repay the loan. The idea in a business is the same, the expectation is that you will not drive the business into the ground so if will still have value.
The second half is once a company is private property, you can do whatever you want with it. So having the company pay back the bill is your right as the owner.
In the U.S., at least, this only works for large companies. In the case of a small company owned by one or just a few people, the owners will have to also take personal responsibility for the loan. So if the company fails and goes out of business, they will still have to pay the loan back.
I believe it’s called a “leveraged buyout.” Same thing that killed Toys R Us. On the surface it’s nonsense: you make a company take out a loan to buy itself. On a deeper level it’s also nonsense but the company’s shareholders get to walk away with a big chunk of cash from the buyout while the company burns behind them.
Once it’s yours you can do whatever you want with it but you only make money if the thing you bought is worth more than the cost of the loan. That can only happen if the people currently running the company are incompetent and/or too nice to do things like fire everyone or back out of promised pension obligations.
I assume you’re talking about twitter but the same holds true for any business. The individual isn’t taking out a loan. They create a new business entity. Let’s call it New Twitter Inc. New Twitter Inc needs money to buy Twitter. Say $45B. Elon Musk is the owner of New Twitter Inc and he needs money. Bank loans New Twitter Inc $45B to buy Twitter. The loan is in New Twitter Inc name. Elon Musk then gives a personal guarantee that New Twitter Inc will pay that loan back. If they default then Elon will have to pay the bank with money from his stock in Tesla.
Lots of companies carry debt, they issue bonds etc. the shareholders aren’t on the hook for this debt.
The company can decide to borrow money and do a stock buyback, reducing the number of shareholders.
In the same way, someone who wants to buy an entire company can arrange for the company he is buying to borrow money and buy out some of the shareholders, and use his money to buy out the rest.
In other words, it’s a combination of buying out most shareholders and a stock buyback at the same time
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