What is a Personal or Directors’ Guarantee?
A Personal or Directors’ guarantee is where a company director personally promised or pledges to repay any debt of the business if they are unable to meet the responsibility. They would, therefore, have to use their own personal wealth to cover any missing debts.
Examples of when Independent Legal Advice should be taken:
- Company credit card
- Overdraft facilities
- Lease of premises
- Commercial contract
- VAT/Corporation Tax or other Tax facilities
- Business equipment
What does it involve?
A limited company is a separate entity to that of the Directors. As a Director, you are not personally responsible for any debts of the company. However, on the other side, it means that some companies will not provide you with credit cards, etc without the personal responsibility of the Directors.
Therefore, many lenders will want the added security that their money will be repaid. To do this however they will require a solicitor to give independent legal advice to ensure that the Director has the full knowledge of what they are effectively “signing up for” and the consequences should the company not be able to service that debt.
It may be that a Director is asking to give a guarantee for:
- A set amount of money
- Future obligations
- Current or existing obligations
A Director is usually aware of the current situation of the company and may realise that without their guarantee that the company may not be able to progress or obtain a loan to help their financial situation. They may therefore not feel that they need an ILA. The lender, however, will require the guarantee to ensure that any repayments can be enforceable against them.
It is important therefore to ensure that you sit and listen carefully to the independent solicitor and let them explain the terms of the agreement before you proceed to sign.
How much will it cost me?
We charge £125 + VAT per guarantee for this service
Why use Oakwood Property Solicitors?
We know that when a lender asks you to sign paperwork that could mean that you put your savings, house or other monetary items on the line that it can be very daunting. You could be guarantying to pay a large debt back that could have severe knock-on effects for your personal life.
We want to make sure that it is explained to you in a fully concise manner before you sign the paperwork.
We need to do the following to accomplish this for you:
- Meet in a face to face meeting or discuss via Skype
- No other party should be present
- Explain the full implications of the paperwork that you are signing and be aware that you could be potentially liable for large sums of money
- Once you are satisfied with the paperwork then we would ask you to sign it
- The paperwork would then be returned to the relevant lender
How do I get Independent Legal Advice?
Simply contact our team at Oakwood Property Solicitors on 0113 218 5727 and we will do all we can to make the process as straightforward as possible.