Enforceability of Bank Personal Guarantee

[dawlishtavern2014]

Hello all,

 

This is my first forum post.

 

I would like to get some advice on my legal position.

 

Company A has an authorised overdraft with bank. Director A didn't sign renewed personal guarantee but signed previous guarantees.

 

Company B buys 70% of shares in Company A and Director B appointed to Company A. No guarantee is signed by Director B as bank have not asked him to sign one yet. Bank policy is all Directors required to sign PG (joint and several liability).

 

Bank decides to enforce personal guarantee against Director A.

 

Legal questions:

 

1. Can bank enforce PG and rely on old PG agreements (precedence);

 

2. If PG can be enforced, can Director A invalidate PG on grounds that Director B did not sign PG, or if not invalidate, can Director A sue Director B for half of PG, or argue to bank that only 50% liability is due as they were negligent in not getting Director B to sign PG.

 

Quite an odd situation this one...

 

Thanks.

[rebel11]

Hi dawlish

 

Welcome to CAG

 

The guys will advise as soon as they are available.

[justwondering]

As I understand, the only people who can remove Director A from a guarantee is the bank, if this was never done then the bank still holds that guarantee and any changes in circumstance of Director A wouldn't change what they had and still have

[steampowered]

1. Yes, the fact that ownership of the shares in Company A doesn't change anything. Company A's existing agreements (the loan agreement) remain in place, and so do the guarantees given by its directors.

 

2. No. The bank is not under a legal obligation to ensure that the other directors sign. The bank is not under a legal obligation to continuously monitor the identity of the company's directors and it cannot force any new director to sign a guarantee. Most guarantees contain a joint and several liability clause which means the bank can ask for the full amount from any one person that has signed a guarantee, it does not have to split liability between the different directors.