Advance not reflected as borrowing in the balance sheet does not...

Advance not reflected as borrowing in the balance sheet does not acquire the character of financial debt; therefore classification in accounts is determinative of financial debt character and precludes claim as such. A loan expressly restricted by contract to land development and diverted the same day to purchase a personal luxury car constituted misuse of corporate funds and breached the loan diversion clause, rendering the transaction non-genuine and the claim bonafide-disputed. Directors role in permitting diversion engages responsibility for misuse. Where a transaction is found to have defrauded creditors, the claim may be rejected and the transaction declared void.

---