Where a director causes a company to make loans in breach of fiduciary duty, the contracts of loan are voidable not void, and no constructive trust can be imposed on the money lent or property acquired with it unless the contracts are first rescinded. Commencement of proceedings seeking equitable relief does not constitute rescission. The Belmont Finance principle (constructive trust over misapplied company funds) applies only to void transactions, not voidable ones. A director who causes a solvent company to pay its lawful debts when due does not breach fiduciary duties merely because the debts are owed to the director.
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