Personal Guarantees – IS MY HOME AT RISK?
Personal guarantees are a scourge on entrepreneurial life which very often rear their heads during economic downturns and specifically with a business failure.
A Personal Guarantee is sought to typically cover:
- Limited company finance, in whatever form, to bring as the finance provider would see as a personal commitment or as we see it a lever allowing banks etc. to ignore the corporate veil.
- Suppliers of goods and services. This is particularly popular with building trade suppliers.
- Leases – where the landlord or asset provider does not see the arrangement as secure as they like. E.g a parent guaranteeing a lease on a son’s or daughter’s business premises.
In the event of a failure of a business to perform on the terms of whatever contract exists. An element of the business’ security has entailed a guarantee, then that guarantee will be called upon…which can be tied to specific personal assets.
At Bell & Company, we are finding more and more financial institutions such as peer to peer lending organisations are becoming “trigger happy” on calling on personal guarantees across the UK.
So in the event of a personal guarantee being called on or demanded, what should you do?
The “knee-jerk” reaction would be to appoint your solicitor/accountant. So Yes, appoint someone but advisably this needs to be a specialist in this very specific field of work. Call us on +44 (0) 2895 217 373
The subject matter of this blog relates to the risk of losing the family house as an example :
- A Personal Guarantee for £500,000 is called on from a couple whose business failed.
- The couple is wealthy, on paper with over £350,000 including £250,000 equity on a home.
- A letter is received demanding repayment of the PG.
If the couple ignores the demand or lost proceedings in this matter, their house is most definitely at risk as it materially contributes to their overall assets – which the guarantee holder now wants.
Getting their hands on the house is a protracted legal process, no matter what happens, even in the event of bankruptcy – but that is not a route to adopt or solution to protect your home.
Our approach is to:
- Engage with our client and offer a full review of our client’s affairs.
- Look at the issues of concern and risks involved.
- Develop a strategy and ensure both the client and ourselves understand the approach we are going to take.
- Attack guarantee holder – this seems strong but attack the guarantee holder, by pointing out its problems, especially if there happen to be any legal ones on their side. By way of this attack, we are materially engaging with a Personal Guarantee holder and from the outset looking for a solution, preferably avoiding litigation.
- Vitally, we must implement and see through the strategy – we cannot stress the importance of this enough.
- Achieve the result.
We cannot stress more the importance of using specialists in this field. We have seen several professionals who take this work on and to put it politely “botch it”.
At Bell & Company, we have developed a dedicated team of 18 since 2009 and helped businesses and individuals, save in excess of £100 million (and rising) across Europe. The monetary amount is for reference only as every case is as important and every case is different.
Call Bell & Company now, on +44 (0) 2895 217 373 or visit our Personal Guarantee Service page: