Local Government Act 2009

A local government must not, either directly or indirectly, make or guarantee a loan to an individual.

Guarantee a loan includes provide a security in connection with a loan.

The councillors who knowingly agree to loan the money are jointly and severally liable to pay the local government—

the amount of the loan; and

interest on the amount of the loan, at the rate at which interest accrues on overdue rates, calculated from the day of the borrowing to the day of repayment; and

any fees, charges, penalties or other expenses incurred by the local government in relation to the loan.

Those amounts may be recovered as a debt payable to the local government.