PROMOTION Director's personal guarantees Debenhams Ottaway... the trusted law firm Relationships Authenticity People s companies struggle to pay debts, lenders and suppliers are Increasingly looking to directors to pay those debts where the director has given a personal guarantee. What is a director's persanal guarantee? Directors and shareholders are not usually liable to pay the debts of company. However, suppliers and lenders often ask a director to personally guarantee a loan or credit account. Ifa personal guarantee is entered, the director guarantees a liability of the company. For a personal guarantee to be enforceable, it must be in writing. It can be in either a contract or a deed, but these must be executed correctly. Personal Legal Advice TWills, Trusts and Inheritance I Private Wealth I Family & Divorce I Residential Conveyancing I Lifetime Planning I Personal Injury I Commercial law services When can a personal guarantee be enforced? Whether the guarantee is enforceable is highly dependent on the facts, in particular: What the guarantee covers. What has happened since the guarantee was given. The liability which is guaranteed must be clear in the guarantee itself. Things such as changes to the credit limit or payment terms may limit or extinguish the director's liability under the personal guarantee. Other events such as the provision of security by the company may also limit or extinguish liability under the personal guarantee. Some guarantees require a particular process to be followed before they can be enforced against the director. The guarantee will only become enforceable if these terms are adhered to. What should you do if o supplior tries to rely upon the guarantee? Ifa lender or supplier is intending to enforce a personal guarantee against you, you should: Request a copy of the original personal guarantee from the lender or supplier. If the lender or supplier cannot produce this, it will be difficult for them to proceed with a claim Prepare a history of the account detailing changes to credit limits, payment terms, security, etc Request details of the sum due and how it has been calculated Check whether any required process has been followed. Finally, it is recommended that you take advice, guarantees can sometimes be challenged on factual and technical grounds. What you should not do it a supplier tries to rely upon a guarantee? Ifthe company is still trading there may be a temptation to cause the company to discharge debts which you have personally guaranteed in preference to other debts. You should not do this. In the event of the company becoming insolvent, the liquidator can challenge any transaction which are preferences and you may be forced to return funds to a company. If you think that youar company is or may become insolvent, you should contact your solicitor, accountant, or an insolvency practitioner. Tel 01727 837161 debenhamsottaway.co.uk Mairead McErlean, Senior Lawyer Debenhams Ottaway DEBENHAMS OTAWAY T: 01727 738230 Yur mpitions ore ur inpintion E: mtmedebenhamsottaway.co.uk W: debenhamsottaway.co.uk PROMOTION Director's personal guarantees Debenhams Ottaway... the trusted law firm Relationships Authenticity People s companies struggle to pay debts, lenders and suppliers are Increasingly looking to directors to pay those debts where the director has given a personal guarantee. What is a director's persanal guarantee? Directors and shareholders are not usually liable to pay the debts of company. However, suppliers and lenders often ask a director to personally guarantee a loan or credit account. Ifa personal guarantee is entered, the director guarantees a liability of the company. For a personal guarantee to be enforceable, it must be in writing. It can be in either a contract or a deed, but these must be executed correctly. Personal Legal Advice TWills, Trusts and Inheritance I Private Wealth I Family & Divorce I Residential Conveyancing I Lifetime Planning I Personal Injury I Commercial law services When can a personal guarantee be enforced? Whether the guarantee is enforceable is highly dependent on the facts, in particular: What the guarantee covers. What has happened since the guarantee was given. The liability which is guaranteed must be clear in the guarantee itself. Things such as changes to the credit limit or payment terms may limit or extinguish the director's liability under the personal guarantee. Other events such as the provision of security by the company may also limit or extinguish liability under the personal guarantee. Some guarantees require a particular process to be followed before they can be enforced against the director. The guarantee will only become enforceable if these terms are adhered to. What should you do if o supplior tries to rely upon the guarantee? Ifa lender or supplier is intending to enforce a personal guarantee against you, you should: Request a copy of the original personal guarantee from the lender or supplier. If the lender or supplier cannot produce this, it will be difficult for them to proceed with a claim Prepare a history of the account detailing changes to credit limits, payment terms, security, etc Request details of the sum due and how it has been calculated Check whether any required process has been followed. Finally, it is recommended that you take advice, guarantees can sometimes be challenged on factual and technical grounds. What you should not do it a supplier tries to rely upon a guarantee? Ifthe company is still trading there may be a temptation to cause the company to discharge debts which you have personally guaranteed in preference to other debts. You should not do this. In the event of the company becoming insolvent, the liquidator can challenge any transaction which are preferences and you may be forced to return funds to a company. If you think that youar company is or may become insolvent, you should contact your solicitor, accountant, or an insolvency practitioner. Tel 01727 837161 debenhamsottaway.co.uk Mairead McErlean, Senior Lawyer Debenhams Ottaway DEBENHAMS OTAWAY T: 01727 738230 Yur mpitions ore ur inpintion E: mtmedebenhamsottaway.co.uk W: debenhamsottaway.co.uk