Reuven and Shimon jointly take out a bank loan at x% interest to invest in a venture they are both involved in, they acquire x% of the company through this investment and the rest of the company is split between various other persons and themselves as employees/partners.
Shimon decides to leave the company but retains the % gained through the investment which he does.
He now wishes to pay his half of the loan back to the bank in order to avoid paying the interest charges but since both their personal guarantees are over the entire sum one cannot be removed unless the entire investment sum is paid back. (Privately they contracted between them to only have an obligation for half)
If Shimon decides to pay back the entire loan would be he allowed to charge Reuven interest on the half of the loan that formed Reuven’s investment, at the sum rate and conditions that the bank was charging?
And what documentation would be needed?
Answer:
If Shimon were to pay back the entire loan, he would effectively have the status of somebody who pays back somebody else’s loan. If one person pays back another’s loan without the borrower’s knowledge, the borrower may or may not be obligated to pay back the person who paid off the debt, depending on circumstances and on differing opinions among poskim. In the case of the question, the intention is clearly not to get into this halachic question, but to pay off the debt to the bank, and to agree that Reuven would now be obligated to pay his half of the loan to Shimon. This would we considered a new loan from Shimon to Reuven, and it would not be permitted to make any interest arrangement, unless a heiter iska is arranged in advance.
Reuven and Shimon should therefore write up a proper document of debt between themselves, stating how Shimon has lent Reuven the relevant sum, stating the payment terms, and including a heiter iska clause. An example of a heiter iska document is available on the site.
