Do I have to pay overdraft guarantee?

[Stuart78]

I was a shareholder of a company, I couldn’t be a director due personal matters.

Whilst a shareholder, I took an overdraft for the business. I didn’t know this was personally guaranteed but now been told it was.

I sold my shares but was still involved and then I increased the overdraft.

The bank has called in the personal guarantee. Do I have to pay it or because I was not legally involved in the business can I get out of it? Should the bank not have checked that I was a shareholder or director?

 

[Mark T Jones]

Do yourself a big favour before you visit a solicitor

Create a clear and concise (factual) timeline of events.

Have all supporting evidence ready and available

Avoid vagaries about what may have happened or specious allegations.

Time they spend wading through vagaries and evasive answers will be chargeable- TBH the less honourable of the profession will have a field day

 

[Stuart78]

Do yourself a big favour before you visit a solicitor

Create a clear and concise (factual) timeline of events.

Have all supporting evidence ready and available

Avoid vagaries about what may have happened or specious allegations.

Time they spend wading through vagaries and evasive answers will be chargeable- TBH the less honourable of the profession will have a field day

I don’t really have anything because it was about 7 years ago.

I just have proof from companies house that I wasn’t part of the company anymore

 

[fisicx]

I don’t really have anything because it was about 7 years ago.

I just have proof from companies house that I wasn’t part of the company anymore

Makes no difference at all to the bank. You owe them money. You signed the documents.

Your only hope is a solicitor can negotiate with the bank. But this won’t be cheap. And you will still owe money, it may just be less than the current £40k.

 

[Newchodge]

I don’t really have anything because it was about 7 years ago.

I just have proof from companies house that I wasn’t part of the company anymore

You have the papers the bank sent you recently, and anything else from them.

 

[Stuart78]

You have the papers the bank sent you recently, and anything else from them.

I just have the copy of the guarantee which they sent me a few weeks ago when I asked for it.
I was taken off the bank about 2 years after the overdraft was taken and the overdraft I assume was renewed until the business closed, but I didn’t get any contact. Until after the liquidation.

 

[Newchodge]

I just have the copy of the guarantee which they sent me a few weeks ago when I asked for it.
I was taken off the bank about 2 years after the overdraft was taken and the overdraft I assume was renewed until the business closed, but I didn’t get any contact. Until after the liquidation.

Take that to the solicitor. Ask if it is a valid PG. If they say it is not ask them to tell the bank. If they say it is, you need to talk to the bank about payment.

 

[GLAbusiness]

This all sounds very dodgy to me. Have I got this right:

1. You were a director and shareholder of the company.
2. You resigned as a director so that you could misrepresent yourself to a third party as having no links to the company.
3. Having resigned as director you carried on working for the company, so you were an employee.
4. As an employee you were tasked with taking out an overdraft. It's not clear but I assume this was an overdraft on the company's bank account.
5. To grant the overdraft the bank required a personal guarantee.
6. Instead of referring this to a director you took it upon yourself to give a personal guarantee to the bank.
7. The company went into liquidation.
8. The bank called in the personal guarantee.
9. For two years you ignored the bank.
10. You now think someone else should get you out of the hole which you dug for yourself.

This all sounds like a mixture of naivety, ineptitude and possibly some skulduggery.

 

[Newchodge]

This all sounds very dodgy to me. Have I got this right:

1. You were a director and shareholder of the company.
2. You resigned as a director so that you could misrepresent yourself to a third party as having no links to the company.
3. Having resigned as director you carried on working for the company, so you were an employee.
4. As an employee you were tasked with taking out an overdraft. It's not clear but I assume this was an overdraft on the company's bank account.
5. To grant the overdraft the bank required a personal guarantee.
6. Instead of referring this to a director you took it upon yourself to give a personal guarantee to the bank.
7. The company went into liquidation.
8. The bank called in the personal guarantee.
9. For two years you ignored the bank.
10. You now think someone else should get you out of the hole which you dug for yourself.

This all sounds like a mixture of naivety, ineptitude and possibly some skulduggery.

No, they could not be a director due to personal issues. They sold thei shares to misrepresnt themselves as having no links.

 

[Stuart78]

This all sounds very dodgy to me. Have I got this right:

1. You were a director and shareholder of the company.
2. You resigned as a director so that you could misrepresent yourself to a third party as having no links to the company.
3. Having resigned as director you carried on working for the company, so you were an employee.
4. As an employee you were tasked with taking out an overdraft. It's not clear but I assume this was an overdraft on the company's bank account.
5. To grant the overdraft the bank required a personal guarantee.
6. Instead of referring this to a director you took it upon yourself to give a personal guarantee to the bank.
7. The company went into liquidation.
8. The bank called in the personal guarantee.
9. For two years you ignored the bank.
10. You now think someone else should get you out of the hole which you dug for yourself.

This all sounds like a mixture of naivety, ineptitude and possibly some skulduggery.

I was never an employee, but I was one of the people that incorporated the company

 

[fisicx]

I was never an employee, but I was one of the people that incorporated the company

As a director?

 

[Stuart78]

As a director?

Yea initially but I had to step down after a short time. I didn’t take any overdraft when I was a director

 

[GLAbusiness]

If you were not a director and were not an employee how on earth were you authorised to arrange an overdraft on the company bank account.

 

[Stuart78]

If you were not a director and were not an employee how on earth were you authorised to arrange an overdraft on the company bank account.

I was still involved in the company and on the bank account

 

[GLAbusiness]

What sort of company allows someone with no formal contract of employment or directorship o control its bank account.

The mind boggles.

 

[Stuart78]

What sort of company allows someone with no formal contract of employment or directorship o control its bank account.

The mind boggles.

we were a bit clueless. I needed to not be involved on paper so convinced someone else to take over.
I can see in hindsight it was stupid.

 

[GLAbusiness]

You keep saying "I took an overdraft". Do you mean it was a personal overdraft which you loaned to the company or did the company take an overdraft which you negotiated.

 

[Stuart78]

You keep saying "I took an overdraft". Do you mean it was a personal overdraft which you loaned to the company or did the company take an overdraft which you negotiated.

It was an overdraft on the companies bank account for the company which was personally guaranteed in my name

 

[fisicx]

Your story is very confusing and complicated. I’m not sure the bank will have any sympathy and let you off paying the debt.

Until you engage a solicitor and have a meeting with the bank you are on the hook for the loan repayment.

Do you own a house or have anything of value?

 

[GLAbusiness]

IANAL but I can't see any mitigating factors. It seems clear to me that you owe the bank £40K

 

[Stuart78]

Your story is very confusing and complicated. I’m not sure the bank will have any sympathy and let you off paying the debt.

Until you engage a solicitor and have a meeting with the bank you are on the hook for the loan repayment.

Do you own a house or have anything of value?

Yea I own my house, so worried about that.
Hoping they might let me do a payment plan but will speak to solicitor next week and go from there.

 

[Stuart78]

IANAL but I can't see any mitigating factors. It seems clear to me that you owe the bank £40K

Yea, seems that might be the case.

 

[Stuart78]

Thanks for everyone’s advice.
Been reading through the paperwork and seems it might be from when I was a director for a brief period. I am confused over dates so think I’ve misunderstood I was told it was renewed but it seems this is automatically down annually and not something I had to agree to. speaking to one of the directors tomorrow and should know a bit more.
I thought when I left the company the debt was the companies. He said I should have contacted the back to be taken of the guarantee.
He’s going to call me tomorrow to go through it and said if he can he will help me talk to the bank.

 

[Stuart78]

Well I don’t remember signing this extension overdraft. Bank has sent me the copy of the guarantee which says it was sent to me but I can’t remember it and would say I never received it.

It wasn’t an extension, I just misunderstood the paperwork

 

[Stuart78]

I don’t really have anything because it was about 7 years ago.

I just have proof from companies house that I wasn’t part of the company anymore

Was overdraft from 11 years ago, I’ve been stupid and misunderstood

 

[Gyumri]

Was overdraft from 11 years ago, I’ve been stupid and misunderstood

If the default in paying back the overdraft occurred more than six years ago then I don't think the bank can call on you to honour your guarantee.

They should have served you with a default notice when the company failed to pay back the overdraft as demanded or when it went into liquidation.

Also it is unlikely that you would have agreed to guarantee a limitless sum or a rolling overdraft, but you would need to read exactly what you signed.

 

[fisicx]

If the default in paying back the overdraft occurred more than six years ago then I don't think the bank can call on you to honour your guarantee.

The PG was signed 11 years ago but was aute-renewed annually. Once defaulted the bank made contact but the OP ignored the correspondence. The timeline suggests the 6 year limit doesn't apply.

But once @Stuart78 talk to a solicitor and the details confirmed they may be off the hook. But I doubt it, banks are very good at this sort of recovery.

 

[Paul Kelly ICHYB]

There has been a lot of good advice on this - please take some of it.

I had previously been a director and shareholder but on paper stopped being both these things. Nothing was ever changed with the bank because my role within the company didn’t change.

So, for most of this conversation, you were not a director, but then you were! Your role obviously did change, BECAUSE YOU WERE NOT A DIRECTOR!

I wasnt at the time the overdraft was taken

So? You gave the PG!

Stuart, you can argue your case here, with us, and, whether you like the answers or not, you will get good feedback. Your only route appears to be speaking to a solicitor. It will cost a few thousand pounds, but could save you £40k!

However, if you lose, you will have £40k, probably interest and solicitors charges to pay - the choice is yours!

 

[Gyumri]

The PG was signed 11 years ago but was aute-renewed annually

I don't think a PG can be "auto renewed." It was the overdraft that was renewed automatically and if so then the cause of action arose when the company either defaulted or went into liquidation. Time runs from that date and not when the guarantor was served a notice of default by the bank (although that's a legal point that needs checking as I forget the case).

If I'm right about this then the OP is in the clear.

 

[DWS]

I don't think a PG can be "auto renewed." It was the overdraft that was renewed automatically and if so then the cause of action arose when the company either defaulted or went into liquidation. Time runs from that date and not when the guarantor was served a notice of default by the bank (although that's a legal point that needs checking as I forget the case).

If I'm right about this then the OP is in the clear.

According to the OP the Company was only liquidated last year.

 

[fisicx]

I don't think a PG can be "auto renewed." It was the overdraft that was renewed automatically

Sorry yes, that's what I meant. The bank has been chasing the debt for two years. They wouldn't have waited for 6 years. They aren't that stupid.

Hopefully @Stuart78 will be back later to let us know how they got on with the solicitor and the ex-director. And possibly even the bank.

 

[Stuart78]

Solicitor is going to talk to the bank for me and go from there. Not much to update at the moment

 

[Stuart78]

Solicitor is going to talk to the bank for me and go from there. Not much to update at the moment

I also spoke to one of the directors this morning and they said that everything was done legit so they don’t think there is anything they can do to help.

 

[fisicx]

I also spoke to one of the directors this morning and they said that everything was done legit so they don’t think there is anything they can do to help.

They are correct. But because you didn't ensure the overdraft was paid off or take action to terminate the PG you remained liable. It unfortunately your lack of understanding of how a PG works that you have ended up in this situation.

I hope you get it sorted but you must be prepared for the worst.

 

[Stuart78]

They are correct. But because you didn't ensure the overdraft was paid off or take action to terminate the PG you remained liable. It unfortunately your lack of understanding of how a PG works that you have ended up in this situation.

I hope you get it sorted but you must be prepared for the worst.

Yea I didn’t know. Messed up!
Can’t afford to pay it all so not sure what will happen.
Cheers for your help

 

[Mark T Jones]

Yea I didn’t know. Messed up!
Can’t afford to pay it all so not sure what will happen.
Cheers for your help

Apart from loophole wrangling, you have 2 lines of negotiation

One is to make a prompt-payment reduced offer - probably pitch in about 50%

The other is to stretch payment over the longest period possible. You'll need to back it up with a statement of income and expenditure

 

[Lisa Thomas]

I've read half of the thread.

It seems to me your only potential get out clause is for the solicitors to argue that the PG is invalid, otherwise you are at risk of being pursued for the £40k, and ultimately could lose your house and be made bankrupt.