If the adult child of a Director applies for a loan, and the Director certifies in writing that she is hiring the child as her employee and therefore paying a salary to the child, is this considered a Reg O loan?

Only if the adult child resides in the home of the Director.

Marty, can you provide the citation that supports that a loan to a director's adult child that lives in the home would be considered a Reg O loan?

Reg O does define "Immediate family" to include children (including adults) who reside in the individuals home at 215.2(g). But nowhere in Reg O that I'm aware of does it say that Reg O restrictions apply to loans to an individual's immediate family members. In fact, the only place in Reg O where the term "immediate family" is used is in relation to the definition of "principal shareholder." Under that definition the shares owned or controlled by an individual's immediate family members would be added to that individual's own shares to determine if combined they exceed the 10% threshold.

There could be a question as to whether the director (by virtue of paying the adult child's salary) is indirectly responsible for the payment of the debt, but I think that would be overstretching. In my opinion, there would be no validity to that approach.

So unless there is some indication that the proceeds are being transferred from the adult child to the director, or that the director is getting a tangible economic benefit from the loan to the adult child, or the director is co-signing or guaranteeing the loan, in my opinion this would not be a Reg O loan.

You're right, I was thinking of principal shareholders. Sorry, Jayc.
Thanks for cleaning up after me, MagicBanker.