Personal Guarantee – I’ve received a Statutory Demand!
A call on a Personal Guarantee can be stressful. Although, if managed with meaningful, professional engagement can be dealt with.
If a Statutory Demand is ignored or the wrong representation is made, the situation can quickly deteriorate. Moreover, a Statutory Demand will lead to Bankruptcy proceedings. Bankruptcy Petitions will be issued within 18-21 days if the Statutory Demand is not engaged with.
Seeking correct advice
Owning assets in excess of the value of the Personal Guarantee will likely have to be entertained in full.
The key point in such cases is to minimise the costs, as the issue of a Bankruptcy Petition will see costs escalate very quickly. However, offers to resolve the situation can still be made but, need to be supported by full representation.
Alternatively, if you cannot honour the Personal Guarantee. Engagement coupled with correct professional advice is important. There are many instances of ‘professional advice’ given by advisors, who aren’t debt specialist.
Who to seek advice from?
Presentation is the key, as you don’t want to create any misconceptions at this stage. It’s all about engaging with the creditors and managing their expectations through effective communication.
Above all, we would suggest that you that nobody should rely on the ‘family friend/good old’ accountant or solicitor. This is a pressurized debt situation with defined time constraints. Strategy and its application are vital. In other words, seek debt strategy specialists
For further Information or guidance on Personal Guarantees, a Statutory Demand or Bankruptcy Petitions – Call Bell & Company on 0330 159 5830
A Personal Guarantee is used by the lender or financial institution to secure a loan or lease. A Personal Guarantee is used to protect the lenders and financial institutions when providing a loan or lease. When signed by the company director, a Personal Guarantee waives the limited liability of the company during the debt recovery stage…. Basically, it is a promise to pay the debt.
Securing loans or leases can be
essential to the growth of any business. They will aid the growth of the
business, the lender will not dictate how the loan is spent, they can be easy
to access and currently, interest rates are low.
Although, all is not what it seems. In securing a business loan or lease the lender or financial institution will require that in the case that the loan cannot be repaid, whether that is that you fall into arrears, enter insolvency or have not followed the terms and conditions of the agreement, the lender or financial institution will secure the loan against your assets. To Secure the loan, most lenders or financial institution will utilise a Personal Guarantee.
Although interest rates are low,
and insolvency rates are lower in quarter 1 of 2019 than quarter 4 of 2018.
There are still factors for concern for businesses, especially in todays
The apparent collapse of the high street
Businesses are open to threats that can cause trading problems
Changing property values
Understanding different factors of Personal Guarantees
Secured or Unsecured – Personal guarantees can be secured or unsecured.
If unsecured, the lender can act
quickly in securing via fixed or floating charge, or a fixed second charge on
personal assets e.g. your family home
Are they enforceable? – YES.
Standard practice would be for the creditor to take the debtor to court.
Scary? Yes, Evil? Absolutely,
End of the World? NO.
Informal arrangements can be made
through negotiation with the creditor before legal action Is enforced. If
informal arrangements cannot be made then, specialist advice and liaising with
third parties such as Bell & Company are available options.
How can Bell & Company help?
Bell & Company are receiving
more and more inquiries from people regarding PGs. We have honed our skillset
and coupled that with a proactive strategic approach to assist people through
the PG process.
Lenders are more likely to engage with Intermediaries – We have experience in dealing with personal guarantees and lenders will recognise our submission. Our proposals and collation of data carry weight.
We provide impartial advice – The advice we provide will always have your best interest in mind
Provide a strategy– We recognise that each case is unique. We create strategies suited to each client’s wants and needs
WE GET RESULTS.
A client had personal guarantee exposure of £6.5million after their business failed. He approached us with the threat of Bankruptcy looming over him.
The Client had lived with this spectre of debt since the
2008 crash and saw no way out.
He hadn’t heard from his Bank in several years and had hoped, in vain, that the debt
had gone away.
After years of silence
from the Bank, our client received a Statutory Demand ‘out of the blue’
from them – the start of the process, potentially leading to Bankruptcy.
If the Statutory Demand was ignored it could have resulted in a Creditor’s Bankruptcy Petition and the family home would have been under serious threat. The equity on the home of c£475,000 was at risk.
Bell & Company were instructed to negotiate a settlement of
with strict time constraints imposed by the issuance of the Statutory Demand
and any pending Bankruptcy Petition thereon.
With the assistance of a third party, the Client raised funds and
was able to settle this debt at £175,000 on a Full
& Final basis.
A call on a personal guarantee can be very stressful but it may be managed with meaningful, professional engagement with the creditor.
If it is ignored or the wrong representation is made, often by ‘misplaced help’, then the situation can quickly deteriorate.
Very often the creditor will issue a Statutory Demand, the precursor to potential Bankruptcy proceedings.
If a Statutory Demand is not engaged in any way within 21 days, the creditor can move to next step and a Bankruptcy Petition may be issued.
Stating the obvious, this brings everything into focus and everyone pays attention!
Seeking expert guidance
If you have more than enough assets to cover the personal guarantee, it should be entertained in full. The integral point in such a case is to minimise the costs, as the issuance of Petitions will see costs ‘mushroom’. Offers in this instance can still be made but need to be supported by full representation and detailed explanation, the presentation is crucial.
Alternatively, if you cannot honour the personal guarantee in full, engagement is as important coupled with correct professional advice.
This seems a very logical thing to say, but we have seen many instances of ‘professional advice’ given by an advisor, who does not have expertise in this niche field of work.
Reiterating presentation is the key as you don’t want to create any misconceptions at this stage. It’s all about engaging and managing the creditors’ expectations. Delivery of the information that will facilitate a decision is imperative.
We would respectfully suggest that you do not rely on the ‘family friend/good old’ accountant or solicitor here. This is a pressurized debt situation with defined time constraints and the strategy and its application is vital.
We are experts in this niche! As ever we offer a free initial consultation, so we know that the cases we take on can be successful.
In our upcoming webinar on Wednesday 26th May, our Chairman, Terry Bell will be exploring if your business model is viable in today’s world, looking at the main components of a business’ structure i.e., sale price, margin and overheads. We will be answering your questions and giving advice based on real scenarios we have come across to date.