What is a Directors Guarantee?
As a Director of a company you may want to secure loans, financial agreements or leases. You may well be asked by a lender to sign a Directors guarantee (or personal guarantee) in respect of the Companies debt.
This is especially true of companies who have limited or poor credit history. If you decide to sign, this may make you personally liable to pay the Company’s debt and place your personal assets at risk.
What are the risks?
These are just a few of the pitfalls of directors guarantees:
The terms of these guarantees can often be far more onerous than one might expect. For example, they are often expressed to be in the form of an indemnity. This means that many of the defences normally open to a normal guarantor, such as a change in the identity of the beneficiary of the guarantee, are not available to you.
It also might be expressed as an all money guarantee, which might mean that until the guarantee is formally discharged by the beneficiary, the guarantee will cover all monies owed to them and not be limited to the amount in the original loan. This would be a serious undertaking.
Many are expressed to continue after death, which could affect your estate and those you wish to leave assets to.
Be aware also that if you transfer your shares or sell the company without a discharge from the lender, there is nothing to stop the new owners borrowing further monies on behalf of the company which will be caught by the guarantee. Care must be taken when considering any such disposal.
How can I help?
Signing a Directors Guarantee can sometimes feel like the only option available. The pressure of trying to get the finance in place can mean that the implications of signing a Directors Guarantee are often not given the attention they require.
As an Independent Solicitor, I can help you to understand the document and provide independent advice. Lenders will also normally demand that you seek independent advice.
I offer a fixed fee with no hidden extras. Contact me to seek advice.