Liquidated company and personal garentee

[teenyb]

Hi,

 

Im looking for some advice for a friend of mine. He had a business that had to be liquidated 15 months ago. It had an overdraft of £25k.

When asked by accountant was he personally liable for any of the debt his honest answer was 'no' as it was a Ltd company. On that basis he was advised to liquidate. Now here is where it gets murky...

 

Three and a half years ago the business began to really struggle, and my friend approached the bank to up his overdraft and was given two options,

 

1) Turn the existing business overdraft into a personal loan. £20k. and start fresh with overdraft.

OR

secure the new overdraft with the deeds for the building the business was based in ! ( the building belongs to his father.)

 

He refused both options and borrowed some money from family to tide things over...

Six months before he liquidated he had an annual call from the bank business relations manager asking how things where and if the bank could help in any way to which he replied well i could do with the overdraft upping to give me breathing space and they said no problem, call in later and i will have some paperwork ready for you...

 

He states he absolutly does not remember at any point being asked to personally guarantee any overdraft facility ! Which having read round the net seems unlikely or unheard of.

 

After 15 months of never having heard off any creditor including the bank, last week he found that he could not access his personal internet banking. He rang the bank and was told there was nothing wrong with his account it must be a glitch and to try later.

Three days later and being passed from one department to another he is told over the phone that he has an outstanding personal garentee that he has not payed back and they have closed his account, they dont want him to bank with them any more ! He was to go and wait for the letter asking him how he wanted to pay them back.

 

And that was that, no bank account, no money which im my opinion was stupid to think that personally carrying on banking with the same bank after the liquidation was going to be ok by them !

 

My main question to start with would be, would the bank not have an obligation to at least try to recover the overdraft from the liquidation process ? ie be represented at creditors meeting in person or in writing. It all seems very vague and casual but the business did have a very long standing relationship with the bank and in particular the branch. Not sure if that would make the slightest bit of difference.

 

Thank you for looking, i have no knowledge what so ever on the subject and i think my friend relied quiet heavily on others advice (accountant etc).

Edited March 21, 2012 by teenyb

[teenyb]

can anybody advise ?

Edited March 22, 2012 by teenyb

[teenyb]

Bump

[ims21]

Hi

 

So has he only been told over the phone that there is a guarantee?

 

Were copies of the signed documents never sent to him?

 

If not I would be wanting to see the documentation that was signed.

 

Who handled the liquidation? All creditors should have been notified.

 

ims

[ukaviator]

Hi

 

In many cases, a creditor will seek a personal guarantee from a company's directors to secure the obligations of a company before they are prepared to provide any credit accounts. A personal guarantee is a legally enforceable agreement that means if the company who entered into a contract fails to pay its debt, the guarantor, usually the company director or any person who signed the guarantee, then becomes personally liable to repay the debt. Personal liability means that your friends assets will become available to pay the outstanding account if the company is unable to meet its obligation.

 

The creditor who holds the guarantee will firstly write to the guarantor for the debt to be paid, If the debt is not paid, the creditor may commence enforcement proceedings and this usually involves the following steps;

 

Apply to court for a judgement

Apply for a bankruptcy notice

Apply for a bankruptcy petition

Apply to court that the guarantor be made bankrupt.

 

He needs copies of the agreements made first, a creditor with a personal guarantee just wants their money back. It is quite probable that they will take a payment plan or a full and final settlement figure. Can he offer anything?

[teenyb]

Hi firstly thank you for your replies,

 

Ims21, the first he heard of the guarantee was in a phone call about not being able to view his personal account on line last week ( 15 months after his company liquidated.)

 

He will definatly request paper work next step but is waiting for some form of written request or any contact from bank so he has a contact name etc !

Also the liquidator who was dealing with it informed all creditors, at the creditors meeting know body showed up.

 

UKaviator, He has nothing to offer them, he has been unemployed since his business went so it really would not be the end of the world if they were to go for bankruptcy.

 

Just one quick question.... If a bank is going to ask a creditor for a personal guarantee, would the creditor not need some assets to be able to secure the overdraft or would they just allocate it to his name ? if that makes sense.

 

Thanks again in advance.