Company Director wanting to remove Personal Guarantor -

ben_and_elly

Hi. I am one of two Company Directors for a garage (service and repair). We are currently hiring ramps over a 5 year period and have signed which I now believe is a Personal Guarantee.

I am leaving the Company and transferring my shareholding to the remaining Director and have asked about removing my name from the Guarantee, but leaving the other Company Director as Guarantor.

Said Company have stated that I cannot/will not be removed as Guarantor, even though I will no longer be part of the Company. Is this normal practice?

Any advice would be gratefully received!

Many thanks

Horace

I think that you would need to seek legal advice on this issue.

markandkate

Much will depend on who appointed the guarantor and why. Often a guarantor is required by the bank to protect their interest and only they can agree to the removal. Often once you have become a guarantor you can only finish if the agreement is dissolved and you may find that the only way to do this is by winding up hte company or partnership.

ben_and_elly

Thank you for your response. I assume then that my first port of call, before Legal Advice, would be to find out the reason behind the Guarantor request.

Thankyou.

paulwf

How much are the ramps worth as that should determine how much care they should take with the contract?

The first thing to do is get hold of a copy of the contract you signed. Is there security to back up the loan and if so what are these assets? The good news for you is that presumably if your company defaults the security will be called on first.

I suppose the bad news is that if your company goes bust they will call on the personal guarantee, which I guess is why they use personal guarantees when limited companies are involved.

If a bank issues a large loan with a personal guarantee it is standard for them to insist on you taking independent legal advice so you can't say you didn't know what you signed. Did you receive any independent legal advice?

So...find out under what circumstances the personal guarantee would be called upon, find out if you should have received legal advice on what you were signing, and find out if the personal guarantee can be transferred.