Personal Guarantee Worry

feeblminds

Hi am wondering if anyone can advise. I am looking at taking over a business that has good yearly profit but holds an indemnity liability over a four year period for commission its been paid (ie payments are loaned to us on the proviso business sticks for four years). To take over I need to sign a personal guarantee so they can get money/house from me if the company goes bust. I do not worry too much about this as I understand there is always risk in such a venture. My main concern is that the firm has a complaint from before I was in charge and the business is say told to pay 750k compensation, they will take my house which Ive worked hard to pay off, leaving me my wife and son homeless and pennyless!

Can I for example register all my assets in my wifes name to protect and bankrupt myself if need arose, or has anyone had any experience or suggestions. I know I will run the company right but u hear horror stories about these things and I dont want to pay for someone elses potential mistakes.

immoral_angeluk

You could, but if you were to go bankrupt within 5 years of the transfer it would be classed as a transaction at undervalue and the official receiver could reverse the transfer and look to claim the asset anyway.
I have no idea about businesses, but considering you've not bought it yet and there's ALREADY big 'what if's' that could have a serious affect on your future, I suppose my question would be is it worth the risk?
You might want to look at getting some independant financial advice.

david39

Why are you even thinking of buying a business that has a potential risk of having a £750k claim upheld against it?

DCFC79

david39 wrote: »

Why are you even thinking of buying a business that has a potential risk of having a £750k claim upheld against it?

Can't fathom why someone woud want to do this

chalkie99

You say you are asked to sign a personal guarantee and then that you "do not worry too much about this".

You then say "they will take my house which Ive worked hard to pay off, leaving me my wife and son homeless and pennyless!"

So you clearly DO worry about it and so you should.

Signing over your house to avoid a potential debt is likely to be regarded as a deprivation of assets and will not protect you.

Further, I doubt very much that a simple signature will be enough as I imagine those requiring the guarantee will want proof that you have security to back it up.

I, too, cannot imagine why you want to do this.

You do have a very good solicitor to advise you I hope?

An internet forum is not the place to get advice on something like this.

silo24

I would look at talking to a specialist insurer to underwrite this risk and factor any premium into your acquisition cost calculations.

Tixy

You need specialist financial advice.
If there is a potential claim against the exisiting limited company then it would be more usual for you to set up a new company and purchase the trade and assets rather than take over as shareholder of existing company. The purchase agreement for the trade & assets would them specifically raise the known issue in such a way that you do not become liable for it.

Speak to a solicitor and/or accountant for advice.

feeblminds

Thank you for your replies, I think you may have slightly misunderstood. I would not invest in a business with a potential claim of £750k. The business is profitable but I only worry if the company is for example sued for something done before I took over (I doubt this will happen but you never know whats been done before you take over) then I worry I could be liable. This is my only concern as I am not starting the business but taking it over. £750k was a random figure I plucked out as an example.

You have however answered my question in that I cannot protect my assets and therefore if it causes me concern I will not enter the venture but likely start a new company in my name where I know all has been done correctly.

I also have appointment with solicitor for advice, just wondered if anyone had experience with PGs before.