Personal Guarantee

Bev74

Hi, hoping for some advice please.

A few years ago I invested in a friends retail business, they created and signed a personal guarantee to assure me that should the business go bust that within 6 months they would reinburse my investment.

The lady who I invested in was a friend, so when she had no choice but to liquidate her business I was very understanding and didn't enforce the fact that in the contract stated she would repay in full within 6 months.

A year later she went into business with her cousin and they agreed that their new business would start paying back my investment, I received payments from both her and from the new company.

Unfortunately that business also went bust and my friend was left in financial hardship - I of course couldn't force her to honour any payments at that time.

But, she then moved away, we stayed in contact for a while and I would ask her how she was, but never asked about money - so it was a shock when all of a sudden she started ignoring me,

Now 3 and a half years on and pushed along by family, I decided to start proceedings to recover my lost money. However her lawyer has come back and said I have breached the contract terms in 2 ways -

1 - Allowing her more time then stated in the contract to pay

2- Varying the initial terms of the loan by accepting payments from a new business in connection to the intitial payment and not from the company in the guarantee

Do they have grounds to counteract my claim?
My lawyer says I have 50/50 of winning in court so I am lost as to whether I should proceed and potentially lose and have their legal fees to pay as well as my own or whether I should seek for a settlement?

Any advice appreciated.

Bev

poppasmurf_bewdley

Sorry, but you really need proper legal advice on this, not the opinion of a bunch of keyboard warriors.

I could say that the 'friend' broke the terms of the agreement by paying you via herself AND the new company after the original default, which would render the agreement null and void, not the other way round as her solicitor says.

And you've not reached the six year cutoff so the debt isn't statute barred.

As I said - please see a professional.

SuperAllyB

I'm neither a legal not a financial expert, and I realise that business and personal aren't always treated the same, but both points made by the other solicitor seem bizarre to me.

Point 1 would suggest that my paying even £10 towards my wife's credit card would make any remaining debt unenforceable.

Point 2 would surely apply where credit card companies allow Arrangements to Pay

Sea_Shell

How much did you invest? £2000 or £200,000?

Is it walk away or pursue at all costs money?

Bev74

I do have a solicitor however she said this a complex case with no guarantees on which way it will go. Also I can’t contact her till tomorrow and just trying to get some clarity before I see her.

The amount invested was £32,000 she has paid around £3k of that from the other business and personally. However that stopped some years back.

Do you think the agreement is unenforceable due to accepting payments from her personally and from the new company?

Also some bits to add:
the guarantee (document) was signed by her as a director of the company.

I didn’t draw up the contract, she created it. I received 5% of shares of the business in return for my investment.

It is worded as the directors of the company agree and personally guarantee by the methods verbally agreed to pay back in full within 4 months should the company fail.

At the bottom it concludes to say the agreement is law abiding between myself and the company with support of personal guarantees from the directors - each named in full. But signed in only in her name

Sea_Shell

That's quite a lot to walk away from, however...

Even if you did successfully win a case against her, does she actually have assets from which to pay you back? Is she a home owner? Mortgaged to the hilt? Any equity?

You say she's in financial difficulty, so you might be trying to get blood out of a stone.

Bev74

From what I know she does have a mortgage but no equity in her home, she basically borrowed money for the deposit from her sister and pays that back - or this was the case when I knew her. She shares her home with her husband and 3 children.

I understand I invested in her company but as a director she personally guaranteed the investment would be paid back should something go wrong.

Emotional I would love to just walk away but I am owed that money and she guaranteed it why should she just be allowed to get away with it.

cajef

Bev74 wrote: »

A few years ago I invested in a friends retail business, they created and signed a personal guarantee to assure me that should the business go bust that within 6 months they would reinburse my investment.

How could she guarantee she would pay you back if they were insolvent, if you invest in any company you must be prepared to lose that money if things go wrong.

If they do not have any money how do you think they can repay you?

Bev74

Obviously at the time of the guarantee, the company was doing well otherwise I would never have invested.

I would think a personal guarantee was suffice insurance for me that I would be repaid regardless of what happened to the company.

cajef

Personal guarantee means nothing if they don't have any money.

D_M_E

Ask your solicitor if the other directors can be chased on the grounds of joint liability as the guarrantee has their names on it despite the fact that they did not sign it.

Could she have signed it as their authorised agent on behalf of the company - ask your solicitor.