My Partner Wasn’t Aware of The Consequences of a Personal Guarantee

The team at Bell & Company help business owners across the United Kingdom and Ireland, who find themselves in financial difficulty as a result of personal guarantees....more

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My Partner Wasn’t Aware of The Consequences of a Personal Guarantee

Very often a provider of credit will look to extend the request for a Personal Guarantee from only the director/owner to then include the spouse/partner.

The creditor usually requests this when the principal asset of the director/owner is jointly owned with the spouse/partner. Usually, the main asset is the family home, and this approach is effectively securitising their position.

In such instances, case law instils the requirement that the spouse/partner must be able to obtain separate Independent Legal advice.

Any Solicitor giving such advice must point out all the risks. Often when the family home is involved, they conclude and advise that he/she should not commit to the Personal Guarantee.

Armed with that advice however a commercial decision to commit to the Personal Guarantee is made as credit/finance sought is vital to the business and therefore the joint guarantee grudgingly is provided.

All of this is undertaken with the backdrop that the business is fine, and the Personal Guarantee will not be called on, but business is never that smooth.

In the cases we have and continue to work on, this is the position but the need to commit a partner/spouse to a Personal Guarantee can cause friction, as the decision ‘nags away’ at them.

Even if the legal advice is given then the implications of what will happen are not fully understood or ignored……until it goes wrong!

As advised in the ‘Is Your PG Valid’ section, a PG is a Lender’s Security so must be perfected.

If it has been correctly dealt with by the creditors, then this makes the case more difficult.

If it’s not – we will find the flaws therein.

When a PG is called upon it is very often a rude awakening for all, and the pressure can break people/couples if not dealt with promptly and quickly.

At Bell & Company we are empathetic to the emotions involved here but this is business, and our role sees us look to undermine and find weaknesses in any claim and ultimately achieve the solution.

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