Advice Needed on HSBC Personal Guarantee

[Mr Nevis]

Hi All

I'm new to this but hoping someone can help.
I and two other directors have had a PG for £150k called in for an overdraft with HSBC.
The company ran successfully for over 15 years

The overdraft was required to support cash flow during an expansion to our factory but ultimately
the company became insolvent due to the delays in getting the factory upgrades completed.
The three directors put all their own cash in toward the end to try and save it but to no avail and we are now broke with no immediate signs of income. Hence I ask for advice here to avoid expensive legal advice.

I've maybe £10-20k in equity in the house, which is half owned by my wife, based on current sales prices in the area.

Can anyone advise how I should respond the the formal demand letter or who to turn to for advice.

I acknowledge what I signed at the time when there was great excitement about the future of the business and I take responsibility for this but could do with knowing what my options are.

Thanks in advance

 

[Chris Ashdown]

The trouble may be that bank overdrafts are normally guaranteed by the directors on a all or individual method of collecting the guarantee, so if there are say three directors and two have no assets they would go for the third one to pay up the whole overdraft or variations depending what they can get from each person. the problem is you each sign as a guarantor and not as a percentage of the loan / overdraft

 

[Mr Nevis]

Thanks for clarifying that Chris.
Do you have any thoughts on the steps I should take?

 

[UK Contractor Accountant]

First port of a call is to get a copy of the certified guarantee that you all signed - proof of debt. Normally you are asked to sign in front of a solicitor/professional so that you are made fully aware of what you are signing for.

 

[UK Contractor Accountant]

Have a read here

http://www.freshbusinessthinking.com/articles_print.php?CID=8&AID=10983

 

[Chris Ashdown]

First Class reply

 

[Mr Nevis]

Thanks Guys, much appreciated.
I will give that article a good read

 

[Robert Moore]

May I suggest that you give Mel Loades a call who runs the website personalguarantee. He makes a living challenging PGs. His mobile is 077 34567 446. I will tell him to expect your call?? They take a cut of any savings on the PG

 

[bovine]

What is happening with the company and its assets? You mention the money was needed for factory upgrades - is there any scope for realising money from these?
Assuming the PG is a valid one, the bank are going to want to realise as much cash back in as short a period of time and least hassle as possible. Quite often as has been mentioned the three of you can individually be held liable for the whole amount. So if one of the guarantors has significantly more assets than the rest, they will go after them.
You can often negotiate a lower amount to be paid, by offering a chunk of cash. But unless you can realise assets from the company without creating other issues, they probably wont want to play ball.
Ultimately, if the PG is valid then you just need to be honest with the bank and detail the incomings, outgoings and assets on the form that will inevitably come and go from there. The final possibility would be they decide to push for bankruptcy, but if the equity in the house is modest and you dont have any other assets mentioned, it may not be such a bad thing. Its not ideal, but may actually be the best option for you.

 

[PGI COVER]

Give Mel a ring as advised. Too late I know, but this is precisely why I wrote personal guarantee insurance and eventually for it underwritten after 8 years. This happens too many times. Mel, might be able to help. I won't this time. But maybe someone reading this will be able to help themselves

 

[Mr Nevis]

Thanks for the posts guys. I have found some work which is why I haven't been on the forum.
I have also contacted Mel so hopefully he can help in some way.
The company is currently being liquidated and assets being sold with some success. HSBC asset finance own the equipment. There was an outstanding amount owed to them but 75% of this has been realised through asset sales to date and the is still some valuable pieces of kit there so with some luck this will be cleared. We also signed a PG for this but as it hadn't been called in due to the ongoing asset sales and we expect to get close to if not clear this amount. I have since found out that the two PGs are cross linked. Do you think this could help in negotiations?
I would like to avoid bankruptcy as you can imagine. What would their motivation be to do this?