Director’s Personal Guarantees: Why Lenders Want Them and Why You Need Expert Independent Legal Advice
What is a Director’s Personal Guarantee?
A director’s personal guarantee is a legally binding agreement where you, as a director, agree to be personally liable for your company’s debts – mortgage, remortgage, for example. Essentially, if your company defaults on a loan or other financial obligation, the lender can pursue you personally for the outstanding amount.
Why Do Lenders Require Personal Guarantees?
Lenders often seek personal guarantees to:
- Reduce Risk: For lenders, lending to limited companies can be risky. If the company fails, its assets may not cover the outstanding debt. A personal guarantee provides an extra layer of security for the lender.
- Demonstrate Commitment: By putting your personal assets on the line, you demonstrate your confidence in the company’s ability to repay the debt.
- Increase Accountability: Personal guarantees encourage directors to manage the company’s finances responsibly.
- New or Small Businesses: Lenders view new or small businesses as higher risks, and personal guarantees are often a condition of lending.
The Need for Independent Legal Advice
When asked to provide a personal guarantee, it is vital to seek independent legal advice from experts who are experienced professionals in such matters. This is where experts like Orobosa Solicitors come in. Here’s why:
- Understanding the Legal Implications: A Solicitor can explain the full extent of your liability and the potential consequences of signing a personal guarantee.
- Negotiating Terms: Where applicable, a Solicitor can help you negotiate the terms of the guarantee, potentially limiting your liability or securing more favourable conditions.
- Identifying Potential Risks: A Solicitor can identify potential risks associated with the guarantee and advise you on how to mitigate them.
- Ensuring Compliance: A Solicitor can ensure that the guarantee is legally valid and complies with all relevant regulations.
- Protecting Your Interests: Independent legal advice ensures that your interests are protected throughout the process.
Why Choose Orobosa Solicitors?
Orobosa Solicitors has a proven track record of providing expert legal advice to company directors. We understand the complexities of personal guarantees and can provide you with:
- Clear and Concise Advice: We’ll explain the legal jargon in plain English, ensuring you fully understand the implications.
- Personalised Service: We’ll take the time to understand your specific circumstances and tailor our advice accordingly.
- Experienced Professionals: Our experienced team has the expertise to guide you through the process.
- Protecting your assets: We will work hard to ensure the best possible outcome for you.
What to Consider Before Signing:
- Company’s Financial Health: Carefully assess your company’s financial health and ability to repay the debt.
- Personal Assets: Consider the potential impact on your personal assets if the company defaults on its loan obligations.
- Alternative Financing: Explore alternative financing options that may not require a personal guarantee.
- Limit the Guarantee: If possible, try to limit the guarantee you are giving to a specific amount or period.
Conclusion
Director’s personal guarantees are a serious matter. By understanding the implications and seeking expert independent legal advice from professionals like Orobosa Solicitors, you can protect your personal assets and make informed decisions. Don’t sign anything without fully understanding the consequences. Contact Orobosa Solicitors today for a consultation and ensure your peace of mind.