Guarantor for company account

[softcushion]

Hi,
I'm one of two directors of a limited company. Both of us signed a personal guarantee of £80,000 to the bank. The guarantee is joint and several, so we are liable together and each of us separately for the full amount. My co-director has become a loose cannon, has taken control of the finances and is ruining us, and she refuses to listen to me or allow me access.
Obviously this is an intolerable situation for me but I don't know what to do.
I know we are constantly at or near the £80,000 overdraft. I know three months notice is required by the bank to get out of the guarantee, and I know that whatever overdraft exists at the end of three months must then be repaid.
As we are jointly and severally liable for the guarantee, is it possible for me to give notice to the bank without telling the other director?

 

[softcushion]

And would she then be liable for the overdraft on her own?

 

[Mr D]

As we are jointly and severally liable for the guarantee, is it possible for me to give notice to the bank without telling the other director?

Yes.
The hard part for you is getting the bank to give up the guarantee. Have you a replacement to take it on?
If they don't agree to release you then you have a problem.

What is more surprising is how someone takes control of the finances away from a director?

 

[softcushion]

She has always had control, it's been her way. I thought I could trust her and I was wrong.
I don't have anyone to take on my part of the guarantee but as it includes the term 'severally' I was hoping that I could leave it to her. I'm afraid I'm not a natural business woman, I went into this blind. I know that's stupid, but unfortunately it's true.

 

[Mr D]

She has always had control, it's been her way. I thought I could trust her and I was wrong.
I don't have anyone to take on my part of the guarantee but as it includes the term 'severally' I was hoping that I could leave it to her. I'm afraid I'm not a natural business woman, I went into this blind. I know that's stupid, but unfortunately it's true.

As directors you have equal power, equal voting. Equal responsibilities to the company.

Getting out of a personal guarantee can be hard to impossible.

I'm guessing there's no shareholder agreement either?

 

[softcushion]

We each have a fifty percent share holding but it's worthless.
The power has never been shared, we have never voted on anything. She has always said she has to do everything her way. She has always had control and I have worked hard but had no input into the running of the company. She has been the main force. She had a successful company before this so I thought I was in safe hands.

 

[KAC]

If you give notice to the bank, they are likely to immediately freeze any borrowing to prevent "The Rule in Clayton's Case" applying. You should take paid for legal advice Good luck in sorting it out

 

[Neil Lukins]

As a director you could approach the bank if you are named on the account to see if they can switch the guarantee from joint and several to limited liability e.g 40k each. They will only do this if both parties can prove they have some nett worth. If not they will just keep as J/S.

Alternatively if this is not possible you could look to apply for PG insurance which you could apply for yourself and this will cover a portion of your PG.

I've enclosed a link to our website which gives more info on PG insurance. You can get a FREE quote also.

https://www.allstarfunding.co.uk/personal-guarantee-insurance/

 

[Mark T Jones]

Alternatively if this is not possible you could look to apply for PG insurance which you could apply for yourself and this will cover a portion of your PG.

I've enclosed a link to our website which gives more info on PG insurance. You can get a FREE quote also.

https://www.allstarfunding.co.uk/personal-guarantee-insurance/

Have you looked at at the T & Cs on PG insurance, because I'm pretty sure it would be invalid here.

 

[Mark T Jones]

If the business is being mis-managed and is likely to fail, then it is likely to be in your interests to remove yourself. It's probably worth searching multiple other threads along those lines.

With regards to the PG, giving notice to the bank will almost certainly cause them to call in the overdraft, in which the PGs would be enforced.

Much depends on the overall situation, but one route of action would be to negotiate an exit whereby your business partner indemnifies you against any calls on the guarantee until such a time as the bank release you (typically that will be for re-negotiation or 6 months after it is repaid)

What ever route you choose, be sure to take legal advice.

 

[Neil Lukins]

Have you looked at at the T & Cs on PG insurance, because I'm pretty sure it would be invalid here.

TCs reviewed and key points below

Where the PG is J/S, the exposure would be the same. The policy can cover up to 5 Directors at no additional cost, for this reason, it would make sense to also add the co-Director to the Policy. All Directors would need to complete a Declarations form.

The typical PG Insurance rates for unsecured business finance range from 2.4% to 3.6%. The rates are calculated on 100% of the PG amount (ie £80k in this case) and the premiums are subject to Insurance Premium Tax (IPT) @ 12%.

DM me if you need more info

Link below for a FREE quote

https://csp.purbeckinsurance.co.uk

 

[Mark T Jones]

TCs reviewed and key points below

Where the PG is J/S, the exposure would be the same. The policy can cover up to 5 Directors at no additional cost, for this reason, it would make sense to also add the co-Director to the Policy. All Directors would need to complete a Declarations form.

The typical PG Insurance rates for unsecured business finance range from 2.4% to 3.6%. The rates are calculated on 100% of the PG amount (ie £80k in this case) and the premiums are subject to Insurance Premium Tax (IPT) @ 12%.

DM me if you need more info

Link below for a FREE quote

https://csp.purbeckinsurance.co.uk/?rid=eaf81e24-d22a-4163-8280-67fc71405301

I'm pretty sure you know those weren't the terms I was refering to.

Why do you only ever post when you get a sniff of commission?