What steps does one need to take to enforce a personal guarantee over a defaulting borrower?

mikeprice

I loaned thousands of pounds to a UK business, a Limited Company, a few years ago in the form of a loan note (also known as mini-bond). To protect my investment, as well as a legal charge on the business, I got a Personal Guarantee from the Director. He has considerable assets, worth many millions of pounds (verified in writing from his accountancy firm).

The arrangement was I would receive monthly interest payments and get my full capital back after two years.

To cut a very long story short, the Director started defaulting on his payments over a year ago. I've chased him up, through every means possible, a thousand times, but he hasn't paid a penny in interest, nor has he returned my capital. 

A couple of weeks ago the Company went into liquidation. This is due to the debts it has to multiple lenders. Having experienced these situations before, the liquidation/administration process is likely to drag on for years and I'm unlikely to get anything back.

Therefore, I wish to enforce the personal guarantee I have. However, I've never had to do that before. I've Googled phrases like "enforce personal guarantee" and various variations of that phrase, but the majority of webpages that appear in the search results guide borrowers on how to wriggle out of their personal guarantee liabilities. It's made me quite worried. I can't find anything much in terms of how to enforce a personal guarantee.

I imagine I could hire a legal firm, but my experience of lawyers hasn't been great in the past and don't want to pay them thousands of pounds at their hefty hourly rates if I can avoid it. However, if that is the only/best option, I'm willing to take the hit and would appreciate any recommendations of who I may contact.

The Insolvency Service told me I may be able serve a statutory demand myself, so I'm wondering if that's a route I should take. I'm not sure if that's the first formal step one should take (subsequent to sending formal demand letters, which I've done) towards enforcing a personal guarantee?

Also, I have grown to discover the Director in question is a very devious and slippery character and if I go it alone, I'm wondering if it'll put me in a weak position and much more likely to fail in my quest to get my money back?

Another option I've considered is a debt collection firm - or a law firm - that may be able to take my case on a 'no win no fee' basis. Do they take on cases like mine? If so, do you have any recommendations of firms please? Feel free to DM me if you're not allowed to make any suggestions publicly on these forums.

I'd very much welcome any guidance you may offer as I'm quite lost. The borrower has been making a fool of me for over a year and this long-standing situation is continuing to cause me infinite distress.

Thanks very much in advance.

[Deleted User]

mikeprice said:

To cut a very long story short, the Director started defaulting on his payments over a year ago. I've chased him up, through every means possible, a thousand times, but he hasn't paid a penny in interest, nor has he returned my capital. 

If he made any payments, as you suggest he did,  then he'll have paid Interest and some of your capital.You now need to work out the amount owed.

What sort of figure are you talking about? MCOL would be the simplest route dependant on the answer.

mjm3346

"I got a Personal Guarantee from the Director - A couple of weeks ago the Company went into liquidation"

If the Director knows what they are doing then they will go bankrupt and there will probably be little/nothing to collect.

longjohnjohnson

mikeprice said:

I loaned thousands of pounds to a UK business, a Limited Company, a few years ago in the form of a loan note (also known as mini-bond). To protect my investment, as well as a legal charge on the business, I got a Personal Guarantee from the Director. He has considerable assets, worth many millions of pounds (verified in writing from his accountancy firm).

The arrangement was I would receive monthly interest payments and get my full capital back after two years.

To cut a very long story short, the Director started defaulting on his payments over a year ago. I've chased him up, through every means possible, a thousand times, but he hasn't paid a penny in interest, nor has he returned my capital. 

A couple of weeks ago the Company went into liquidation. This is due to the debts it has to multiple lenders. Having experienced these situations before, the liquidation/administration process is likely to drag on for years and I'm unlikely to get anything back.

Therefore, I wish to enforce the personal guarantee I have. However, I've never had to do that before. I've Googled phrases like "enforce personal guarantee" and various variations of that phrase, but the majority of webpages that appear in the search results guide borrowers on how to wriggle out of their personal guarantee liabilities. It's made me quite worried. I can't find anything much in terms of how to enforce a personal guarantee.

I imagine I could hire a legal firm, but my experience of lawyers hasn't been great in the past and don't want to pay them thousands of pounds at their hefty hourly rates if I can avoid it. However, if that is the only/best option, I'm willing to take the hit and would appreciate any recommendations of who I may contact.

The Insolvency Service told me I may be able serve a statutory demand myself, so I'm wondering if that's a route I should take. I'm not sure if that's the first formal step one should take (subsequent to sending formal demand letters, which I've done) towards enforcing a personal guarantee?

Also, I have grown to discover the Director in question is a very devious and slippery character and if I go it alone, I'm wondering if it'll put me in a weak position and much more likely to fail in my quest to get my money back?

Another option I've considered is a debt collection firm - or a law firm - that may be able to take my case on a 'no win no fee' basis. Do they take on cases like mine? If so, do you have any recommendations of firms please? Feel free to DM me if you're not allowed to make any suggestions publicly on these forums.

I'd very much welcome any guidance you may offer as I'm quite lost. The borrower has been making a fool of me for over a year and this long-standing situation is continuing to cause me infinite distress.

Thanks very much in advance.

Who owns these assets?

I bet it isn't him.

Sue him through the courts if you wish, but I suspect he will have no tangible assets and you'll be out your court fees.

You've been taken for a mug.  Ask yourself this question.  Why would a director of a company worth "many millions" of pounds need a loan from you in the thousands?

Voyager2002

First, verify that he really does own (in his own name) assets sufficient to repay what he owes you. If not, there is little point spending time and effort on this. You might consider engaging a detective agency for this.

Secondly, before you could get anywhere with debt collectors and so forth you would need a court order. Depending on the amounts involved this could be a fairly simple DIY job. See if you can have a chat with the clerk at your local county court, who should be able to tell you what forms to fill in and fees to pay in order to begin the process.

Third, I would avoid 'no win no fee' lawyers. Remember that a win means a court ruling that he owes you the money, which is likely to be very easy: and at that point you owe the lawyers their fee. The hard part is identifying assets that belong to him and making him pay.

masonic

Voyager2002 said:
Secondly, before you could get anywhere with debt collectors and so forth you would need a court order. Depending on the amounts involved this could be a fairly simple DIY job. See if you can have a chat with the clerk at your local county court, who should be able to tell you what forms to fill in and fees to pay in order to begin the process.

In the case of a mini bond backed up by a personal guarantee, it is highly unlikely that a judgement could be enforced in respect of a single lender, potentially at the expense of the other lenders who would have an equal claim to a share of any assets.

Voyager2002

masonic said:

In the case of a mini bond backed up by a personal guarantee, it is highly unlikely that a judgement could be enforced in respect of a single lender, potentially at the expense of the other lenders who would have an equal claim to a share of any assets.

Even when (i) the assets belonged to the individual, not the (failed) company; and (ii) the other lenders did not have a personal guarantee and so had no claim on the individual's assets?

masonic

Voyager2002 said:

masonic said:

In the case of a mini bond backed up by a personal guarantee, it is highly unlikely that a judgement could be enforced in respect of a single lender, potentially at the expense of the other lenders who would have an equal claim to a share of any assets.

Even when (i) the assets belonged to the individual, not the (failed) company; and (ii) the other lenders did not have a personal guarantee and so had no claim on the individual's assets?

If there is no personal guarantee associated with the mini-bond itself, but the OP has entered into a written agreement with the director, which has not been made with any of the other bondholders, then once the shortfall is known a simple moneyclaim should lead to an answer as to whether or not it is enforceable. However, it seems vanishingly unlikely the OP has such a special agreement.

In reality, it is far more likely a personal guarantee was made to all of the bondholders as part of the financial promotion and subscription agreement under which the bonds are issued, so the bondholders would need to be dealt with on an equal footing.

Grumpy_chap

mikeprice said:

I got a Personal Guarantee from the Director. He has considerable assets, worth many millions of pounds (verified in writing from his accountancy firm).

What are the nature of these assets?
Are there any other debts secured against these assets?
Are there any other debts not secured against these assets?
What is the individual's net worth?  Actual net worth after all debts are discounted.

masonic

Grumpy_chap said:

mikeprice said:

I got a Personal Guarantee from the Director. He has considerable assets, worth many millions of pounds (verified in writing from his accountancy firm).

What are the nature of these assets?
Are there any other debts secured against these assets?
Are there any other debts not secured against these assets?
What is the individual's net worth?  Actual net worth after all debts are discounted.

To add to this list... Are any of the assets owned jointly with others, such as a primary residence jointly owned and occupied by a spouse? Enforcing security to the detriment of other third parties would be extremely challenging.

sourcrates

You have recourse to use the courts just like anyone else, which court you use depends on how much he owes you, anything under one hundred thousand pounds, can be claimed back via MCOL.

Although obtaining the judgement is just the first step in the dance, the debtor, given his track record, is unlikely to just pay up, I suspect its not his first dalliance with bad debt, so forget lawyers, debt collectors, Serpico, and Frank Cannon, waste of time and money.

You will have no idea or be able to find out what assets he may own, or who else may have a claim to them, so once you have the judgement, escalate the matter to the high court, cost is around £60 for this, then engage HCEO`s to pay the man a visit, if they are able to gain entry (not always possible) they should be able to ascertain what assets, if any, he actually has, and if anyone else is laying claim to them, and that is the only way you get your money back.

If there are no assets, or there are, but are in someone else's name, then you are out of luck, but at least you will know.

As long as the HCEO`s can make peaceful entry, you might get something back, it will all hinge on being able to access his property, they either have to be granted access, or be able to enter through an unlocked door, he may have cars in his name as well.

Whatever the outcome, its the quickest and cheapest way of going about this.