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AFT provide guarantee debt settlement solutions including debt reduction agreements where a reduced payment is made as full settlement of the guarantee liability.

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Personal guarantees from Directors of limited companies are now a common feature in the SME market.

Whilst the business is doing well the potential implications tend to be ignored, but this can change significantly should the business get in to financial difficulties.

Directors, who may sometimes not even realise that they have provided a guarantee, can be faced with a demand from the creditor/lender to make good the shortfall for any debt that remains outstanding following a business insolvency.

AFT have extensive experience in dealing with personal guarantees and can provide help and support for Directors who may still be coming to terms with the failure of their business.

Our role is to review the circumstances surrounding the taking of the guarantee to highlight any shortcomings and/or irregularities in this respect.

The outcome of this review, together with the client’s individual circumstances, will then become a key factor in seeking a sensible debt settlement agreement.

If you are concerned about the implications of a personal guarantee it is important to act quickly. You may receive letters and even a formal demand for payment. If you do you must not ignore them, as it will lead to your case being processed quickly through the Courts and you will lose control over how matters are dealt with.

Typical Guarantees

Lending Related Guarantees

Lenders have been taking guarantees from Directors for a long time and, in general, they have learnt from their own past mistakes. As a result, most guarantees are robust.

However, we continue to see circumstances whereby Directors have relied on assurances made by representatives of lenders at the time the guarantee was provided.

It is important to understand the detail and basis of any assurances made by lenders in the context of taking the original guarantee as they could impact upon its validity.

Trade Creditor Guarantees

Guarantees in favour of trade creditors are not new but in recent years it seems to be common practice to incorporate such a guarantee within credit application forms.

As a result, Directors may not even realise that they provided a personal guarantee when they sought credit terms from their supplier.

Property Lease Guarantees

Guarantees on property leases are less common but may still be relevant for businesses trading from leased premises.

Directors also need to take care when assigning a lease to another company as they may find that their guarantee remains in place even after the lease has been assigned.

Landlords do have a duty to mitigate their loss by seeking to re let the property. However even if they are successful you could still be liable for the difference in rent.