Money owed by failed LTD company.

catflea

Quick question on behalf of a friend.

I've been speaking to one of my friends about her money being tight (bless her, shes unemployed and not even claiming JSA yet) and she seems to feel there is a spectre of a bacruptcy court looming over her head.

Reason being that she started a small business in the late 1990s and borrowed a large sum of money to get if off the ground (£45k I think) in doing so both she and her business partner - who acted as finance secretary had to give 'personal guarantee' against the funds (her words) even though the loan was in the name of the business. A few years later she went through a deed of incorporation(?) to make the company limited with 5 directors.

Since then the company has hit the wall and a large chunk of the monies remains outstanding. She is absolutly paranoid that she is going to be dragged through bancruptcy proceedings etc, etc - whereas my belief is that as the debt is held in the name of a limited company and therefore she can't be held liable.

Who, if anyone, is right?

Tixy

A personal guarantee does indeed make her personally liable for whatever amount she agreed to and to the bank she gave it to.
Unless the bank specifically revoked the PG when she incorporated (which I think is fairly unlikely, unless they has some other asset owned within the ltd company to secure it on - such as a property) then the PG will remain and they will likely still come after her for that amount.

Depending on the amount involved etc that she personally guaranteed (and how much of that remains after the company is wound up) it may be that she can make an arrangment with the bank to pay it in installments. That of course would be assuming she found employment elsewhere and had an income.

DarkConvict

I agree, debts she gaurenteed will be owed by her, not the company.

Only if the loan was put into the company's name and the PG ended would she not be liable.

The other thing to consider is as this loan is so old, has it actually been paid off by the company already?

catflea

So the PG would have to have been terminated even if the loan was in the name of a LTD company?

From what she's told me, a large chunk of that initial sum was still outstanding, however she and the finance director had a falling out as the brown stuff was hitting the fan so anythings possible I guess.

I dont think she'll be too happy when I tell her but thanks for the help guys

Tixy

Yes, 'fraid so.
Its usually when a loan is in a LTD company name that a PG is asked for (as if its in individual names they are already personally liable).

Are they having formal advice about winding up the company (from accountants or insolvency firm)? if so then if there are any assets in the company they should usually pay off the bank funding first so the amount she would need to pay might not be as much as she fears.

catflea

The company was wound up a while ago from what I understand. I know things were going wrong in Mar 2009 and the company has been closed - as and when though, not a clue.

DarkConvict

It does not sound good in that case, even if she had a claim against the company to recover funds from them, the company no longer exists and as a limited company no director would be responible for any outstanding money. The business should have seen that any debts personally owed to/by the employees were dealt with to avoid it affecting them when the company is wound up.

catflea

Final question. Does the 6 year unenforcability thing come into it? You can tell I know all the techincal terms :rotfl:

Tixy

catflea wrote: »

Final question. Does the 6 year unenforcability thing come into it? You can tell I know all the techincal terms :rotfl:

Statute barred or more properly the Limitation Act.
I don't know to be perfectly honest. I suspect that as it is a personal guarantee she has given rather than a debt in her name it probably doesn't.

That said if it was getting to be a few years since any payment was made on the loan that the PG relates to it would be worth finding out for sure before she did admit any liability.
I would think maybe business debtline might be able to advise her more comprehensively, might be worth her contacting them for some free advice.

catflea

Oooh, Never heard of them. I shall look up the number and pass it along.

Thanks for your help one and all

DarkConvict

Business debtline is a sister charity of national debtline - http://www.bdl.org.uk/

Basically what Tixy has said is that, even though she has not made a payment it does not make it statute barred for her. It is whether the company has admitted or paid on the debt, the debt itself has to be statute barred, as the owner of the debt can chase the company for money owed, if that fails then they work on the guarantor.