Starting off on the wrong foot?
When forming a company as a director or shareholder, you usually set up accounts with suppliers to acquire goods. To do this, you will typically be asked to provide a personal guarantee (PG) — an unsecured written promise guaranteeing repayment on goods in the event the business does not pay.
To be valid, a personal guarantee has to be:
1. In writing
2. Agreed by you as guarantor in the capacity of guarantor
Most people will sign the PG to ensure that they obtain the goods in order to trade. But like most important documents, you need to carefully analyse and review the guarantee. You need to be aware what it is you are signing and agreeing to do.
You never know what the future may hold, and without properly reviewing the personal guarantee with a professional, you can find your personal assets liable to a creditor during a company liquidation. Held liable, you might find you’ve lost more than you bargained for — your car or even your family home.
To prevent this circumstance, we recommend asset planning well in advance of signing any personal guarantee to protect your personal assets. If you require more information about asset planning, please don’t hesitate to contact the team at Gerry Rea Partners. We thoroughly understand the importance of protecting what you’ve worked hard for.
You can also face personal liability for company debts if:
1. You have taken drawings from the company giving you an overdrawn shareholders account.
2. You have breached your duties as a director/shadow director
It is important to seek professional advice as to your individual circumstances..
What are your options if you are liable for debts?
In circumstances where you are held personally liable for company debts, you have a few options which include:
1. Paying creditors in full
2. Negotiating with creditors on an individual basis- not binding on non-agreeing creditors
3. Entering into a formal compromise with all personal creditors
4. Filing for bankruptcy or no asset procedure.
If you require assistance around asset planning or personal liability in the event of liquidation, Gerry Rea Partners is here to help.
Disclaimer- this article is intending to provide general advice and is not a substitute for professional advice relevant to your personal circumstances. For specific advice to your situation, please email Ben at firstname.lastname@example.org