Personal Or Directors’ Guarantee
What is a personal or directors’ guarantee?
A personal or directors’ guarantee is where a company director personally promises or pledges to repay any debt of the business if they are unable to meet the responsibility. They would have to use their own personal wealth to cover any missing debts.
Examples of when Independent Legal Advice should be taken:
- Company credit card
- Mortgage
- Loan
- 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, 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 to ensure that you listen carefully to the independent solicitor and let them explain the terms of the agreement before you proceed to sign.
Quotes for this service are based on the documentation in question. Please do not hesitate to contact a member of our team for more information. Call us on 0113 218 5727.
Why use Oakwood Property Solicitors?
We understand that when a lender requires you to sign documents it could mean putting personal savings and items at risk. We’re here to provide you with peace of mind by:
- Having a face-to-face meeting or discussion over a video call. No other party should be present at the meeting to ensure you can make an unbiased decision.
- Discussing all the circumstances of the paperwork and making you aware of what will happen once it’s signed. After signing the paperwork, we’ll send it to the relevant lender.
How do I get Independent Legal Advice?
Get in touch with us on 0113 218 5727 and we will answer any additional questions you may have.