We were contacted by two former company directors whose company had gone into administration. They had given directors personal guarantees to support a bank loan to raise money for the company.
When their company failed to pay the loan repayments, the bank notified the directors that it had claims against them based on the personal guarantees they had given to obtain the loan. This was even though the loan was also guaranteed by the Government.
How we helped
We reviewed the terms of the personal guarantee and concluded it was a valid guarantee. We decided that we might be able to help the two former directors reduce the amount they had to pay to the finance company to settle the claims against them.
We advised them that in the circumstances the best approach would be to disclose to the bank their financial situations and make an offer based on what each could pay to settle the claims against them.
The result
We were able to start negotiations with the bank before it had instructed solicitors or started court proceedings against the two former directors. As a result, the bank’s costs were minimal which helped us avoid paying legal costs on top of the money claimed by the bank.
We put forward an offer based on what assets our clients could easily convert into cash to pay the bank. The offer was accepted – just under 50% of what was claimed from our clients.
The two former directors avoided court proceedings being started by the bank and paid a greatly reduced sum to settle the personal guarantee claim.
For more information or advice on directors personal guarantees, please contact Victora Dunstall or Ros Keen.
Posted on August 24, 2017