The transaction was admittedly done to secure tax benefits for Basil and Robert, and to ensure that they would not be charged with a dividend in the amount of the loan from PII. In National Refractories Co. v. Bay State Builders Supply Co., 334 Mass. 541, 544-545 (1956), the Supreme Judicial Court held that: "The statute (predecessor to G.L.c. 156B, § 61) does not require a formal vote by a director in declaring certain dividends or in making loans to a stockholder or director. It is enough if he assented to declaring the dividend or making the loan.

"The purpose of the statute is to protect the creditors of the corporation and to prevent officers of the corporation from sharing in corporate funds which should go to the creditors." National Refractories Co. v. Bay State Builders Supply Co., 334 Mass. 541, 544 (1956). The payment of operating expenses, such as salaries, is essential to the continued viability of a business and thus benefits creditors of the business as well as the business itself.

In establishing liability, the statute does not require a formal vote by the directors in making loans to a director, but only requires that the directors have "assented" to the making of the loans. The cases emphasize that officers of a corporation cannot be permitted to use corporate funds for their own personal benefit in disregard of the creditors and are obligated to return the loans to the corporation or its creditors when such a factual situation can be demonstrated. NationalRefractories Co., Inc. v. Bay State Builders Supply Co., Inc., 334 Mass. 541 (1956). However, personal liability of directors under c. 156, § 37 may only be enforced provided that before a suit to enforce such liability is brought by a creditor of the corporation, a written demand by or on behalf of the creditor upon such corporation for the payment of his claim has been made and the corporation has neglected to pay it for 10 days thereafter.