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

diystarter7

OP
Your ex mats "personal guarantee."

What checks did you make to ensure his "personal wealth etc" was not already spoken for by some other lenders etc or if at all as others said these assets were indeed in its name?

I'm sure you done this but if not and you don't want to thrwo tens of thousands of pounds away of poor advice, waste of time etc etc.

Do this! It can be helpful to discuss your case with a solicitor who's experienced in debt recovery.

Seek their track record. Ask them how to find out who owns what. Get them to check your agreements. If the person does have wealth, how to ensure it is not hidden, changes hands etc etc.


Good luck

masonic

sourcrates said:

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.

The added complication here is that the debt is to a corporate issuer of mini-bonds, in which the OP, presumably along with many others, have invested. The corporate borrower is in liquidation and the bondholders are presumably waiting to see how much, if anything, they will receive. A judgement is unlikely to be made until the actual shortfall is known.

Such mini-bond issuances are generally for not less than 7-figure sums, with typically hundreds of bondholders. A property development company isn't going to get very far on less than that. If the personal guarantee covers all bondholders, not just the one who started this thread, then it would take it out of the scope of MCOL, although this could be an option if the director of the property company made a special arrangement to guarantee just the OP's bonds. If all bondholders have a claim over the assets pledged by the director in the personal guarantee, then they would each be entitled to a share of the proceeds of disposal in proportion to the size of their bond holding.

Something that could be done now and at rather low cost is to have a solicitor look over the subscription agreement and personal guarantee, first to ensure that the personal guarantee is legally sufficient and is adequate in terms of what assets are pledged. This would also reveal who is a party to the agreement - just the OP and the director, or all bondholders and the director.

Grumpy_chap

@masonic seem to have a different understanding on the structure of this loan whereas until then I was simply going off the content in the OP:

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).

Very massive difference between a loan in "thousands of pounds" and a loan in "7-figures".

If this truly is a loan in "7-figures" then I would expect the OP took legal advice at the time of making the loan and should revert to the same legal team that advised at the time of making the loan.

I was actually revisiting the thread to raise the possibility as to whether the OP could have any claim against the Accountants PI cover.  If the Accountant made a statement about the assets held by the Director and knew that would be relied upon by the OP as a material consideration of security against the loan, then the Accountant may owe the OP a duty of care.  That would mean not saying "Person X owes considerable assets" without also having a consideration to the completeness of that statement vis-a-vis any debts or other liabilities hat are also held by Person X.  Having said that, the OP made the loan "a few years ago" and the Accountant's statement may have held true then and not now.

I don't think pursuing the Accountant's PI is a strong route, but I thought it was worth a mention.

We do need to understand here whether the loan was "a few thousands" as the OP implies or "7-figures" as now implied.  If the former, then the OP would be assessing risk / opportunity with little information or support.  If the later, then the OP should have been undertaking rather more due diligence and going into the business proposal from an informed position and understanding the level of risk.

Voyager2002

Grumpy_chap said:

@masonic seem to have a different understanding on the structure of this loan whereas until then I was simply going off the content in the OP:

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).

Very massive difference between a loan in "thousands of pounds" and a loan in "7-figures".

I think @masonic means that the UK business would have raised a 7-figure sum by issuing bonds to hundreds of people. One of these subscribers, the OP, would have handed over a few thousand.

masonic

Grumpy_chap said:

@masonic seem to have a different understanding on the structure of this loan whereas until then I was simply going off the content in the OP:

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).

Very massive difference between a loan in "thousands of pounds" and a loan in "7-figures".

If this truly is a loan in "7-figures" then I would expect the OP took legal advice at the time of making the loan and should revert to the same legal team that advised at the time of making the loan.

I was actually revisiting the thread to raise the possibility as to whether the OP could have any claim against the Accountants PI cover.  If the Accountant made a statement about the assets held by the Director and knew that would be relied upon by the OP as a material consideration of security against the loan, then the Accountant may owe the OP a duty of care.  That would mean not saying "Person X owes considerable assets" without also having a consideration to the completeness of that statement vis-a-vis any debts or other liabilities hat are also held by Person X.  Having said that, the OP made the loan "a few years ago" and the Accountant's statement may have held true then and not now.

I don't think pursuing the Accountant's PI is a strong route, but I thought it was worth a mention.

We do need to understand here whether the loan was "a few thousands" as the OP implies or "7-figures" as now implied.  If the former, then the OP would be assessing risk / opportunity with little information or support.  If the later, then the OP should have been undertaking rather more due diligence and going into the business proposal from an informed position and understanding the level of risk.

I'm certainly not suggesting the OP has himself invested 7-figures in these mini-bonds, but the total raised in the issuance would probably be of this magnitude. It is a shame the corporate borrower hasn't been named, as we've seen lots of threads over on Savings & Investments, and it could be one that's already been evaluated.

By way of example, a couple of such mini-bond issuances were Barbican Bond Co No.1, which raised £1.6m and Fluid ISA Bond, which raised £2.7m in an initial issuance and then another £1.1m, all during 2018. Prior to that there were larger such operations from Blackmore (raised a total of £46m over ~3 years) and the infamous London Capital & Finance (raised a total of £236m over the space of ~5 years). All of these companies are now in administration/liquidation. While mini-bonds are unregulated investments, the financial promotions must be prepared by an FCA authorised firm. Many of them used Northern Provident Investments (now in creditors voluntary liquidation).

Prospectus and legal agreements are drawn up in the same way as for a mainstream investment, so I wouldn't blame a potential investor for not feeling the need to take individual legal advice. These bonds are in many respects very similar to peer-to-peer loans, which are partially regulated, but also have 100% loss potential. Some mistake these for savings vehicles (several were marketed as such, with comparisons to savings accounts in the adverts, typically advertised heavily on facebook and similar platforms) or mainstream corporate bonds. While the small print usually highlighted the risks, a big deal was often made about assets held in security or other "guarantees" that made them appear safe. The big red flag is the interest rate, which tends to be 8%+ and should highlight the magnitude of the risk.

The accountant making the claim about assets is worthy of consideration, although the claim that was actually made could differ from the interpretation, or it could have been true at the time it was made but not now. Another avenue that has sometimes been successful, is where something constituting "financial advice" was obtained from a party connected to the marketing of the bonds, which if argued successfully, can bring FSCS compensation into consideration. This would be highly dependent on the circumstances surrounding the investment, but worth thinking about any telephone discussions had in the lead up to investing in the mini-bond.

Grumpy_chap

@masonic - thank for explaining your understanding of these bond schemes. 

It is rather different to my understanding from the OP's post from which I had taken that the OP had made a loan specifically and directly to X Ltd with a PG from the Director of X Ltd.  If it is all actually via some structured scheme, it is different.

I suspect the OP may well have lost the amount loaned.  Obviously, not what the OP wants to hear.