COMMERCIAL LAW
Independent Legal Advice (ILA) for Director’s Personal Guarantee
When a company director personally guarantees the repayment of business finance, a Director’s Personal Guarantee is required. It ensures the repayment of a business loan or credit facility through personal liability. This legal framework aims to safeguard lenders by mitigating default risks, especially in dealings with small businesses or startups. However, the ramifications for directors can be profound and long-lasting.
Understanding Personal Liability
A Director’s Personal Guarantee places you in a position of individual accountability for your company’s financial obligations. The Personal Guarantee document, which is a formal legal document, outlines specific conditions including the extent of liability, interest rates, and repayment protocols. Signing this guarantee may result in your personal assets—such as property or savings— being kept as collateral against the company’s debts.
Carter Bond can help you with their personal guarantee by providing cost-effective and expert-led advice.
For more information about our independent legal advice (IILA) services please call us on +44 (0)20 3475 6751 or email info@carterbond.co.uk
Examples of when you might need Independent Legal Advice
Personal Guarantee
Are you guaranteeing a loan or mortgage to a limited company? This usually means one thing – the lender will insist that you take “Independent Legal Advice” on signing the guarantee before making the loan.
If you are trading as a limited company, as owner of that company you may be required to personally guarantee the repayment sums. This means you would be liable if the company were to default on payments. You may be asked to obtain Independent Legal Advice where your company is entering into a:
• Start-up loan, or other type of business loan;
• Mortgage;
• Company credit card or overdraft;
• Lease of premises;
• Lease, hire purchase or PCP agreement for a company vehicle or equipment; or
• Sale agreement for assets, or other commercial contract that contains warranties given by the company.
Whilst the purpose of a guarantee seems quite simple, it is still important for you to take Independent Legal Advice so a solicitor can inform you of all the salient terms of the guarantee, their effect and the potential implications. It is also likely to be a requirement of the lender, so they can ensure the guarantee is enforceable.
Whilst a limited company is supposed to be a ‘separate legal person’, with the right to incur its own debts and enter its own agreements, it may not be a credit-worthy borrower for the lender. The limited company may not have significant assets of its own right, meaning a lender, landlord or other party may require, as a condition for them entering into the agreement, that a director or shareholder give personal guarantees for the sums payable under the agreement. It means that you will be acting as ‘guarantor’ for your company.
There are a variety of ‘types’ of guarantees:
• Given solely by one guarantor, or by several, on a “joint and several” basis;
• For a limited sum;
• To cover current, existing as well as future liabilities; or
• To be for an unlimited amount.
A director or shareholder may be reluctant to spend money taking legal advice, especially if they are aware of the company’s financial circumstances, however a solicitor will provide a comprehensive insight into the guarantee that highlights all the risks. It is important that you are fully briefed on these risks, as if the company is unable to pay its debts, you could be required to repay large sums of money. Independent Legal Advice also provides the lender with protection, as it ensures the guarantee is enforceable in Court.
Guarantees should also be considered carefully, if you are required to use a personal asset as security. The lender may place a legal charge over your personal property, whilst the company repays the sums due under the agreement. If the company defaults, you could see the lender apply for a possession order of your property.
It is important to remember that commercial agreements can be complex. Taking Independent Legal Advice on your personal guarantee will leave you fully informed of your potential obligations.
What is independent legal advice?
Understanding legal documents or agreements can be complex and intimidating, particularly when it involves significant financial decisions or risks. Whether you’re a director signing a personal guarantee, or a small business owner involved in corporate loans, mortgages, or equity release, understanding your obligations and the implications of these documents is crucial. This is where Carter Bond’s independent legal advice (ILA) services can make all the difference.
When do I need to take Independent Legal Advice?
The need for Independent Legal Advice can arise in several situations, including but not limited to:
- where you live at a property that you do not own and are not listed as a borrower on the mortgage. The lender will require an Occupier’s Consent Form that waives your right to remain in the property if they repossess and any financial interest you have in the property. Please see our FAQ on Occupier’s Consent Form above.
- where you are acting as a guarantor for a limited company’s borrowing. Please see our FAQ on Personal Guarantees above.
- where you act as a supporting borrower for a mortgage (Please see above); or
- an employment settlement agreement.
How much will it cost me to obtain Independent Legal Advice?
Unfortunately, there is no single answer to this as it depends on factors like:-
- Where you live
- What you require Independent Legal Advice for
However, by contacting us at Carter Bond Solicitors, we will be able to provide you with a fixed fee quote.
How long does it take to obtain Independent Legal Advice?
Independent Legal Advice can be organised quickly. If you reach out to us, we can arrange a time slot with one of our solicitors which will usually take place in the same week, provided we have received your documentation and had time to review it.
Can I waive the requirement for Independent Legal Advice?
The short answer is no, if you want to satisfy the lender’s requirement and allow the transaction to proceed.
You can refuse to take this step, but in all likelihood, your lender will simply refuse to proceed unless you comply with its requirements.
Why choose Carter Bond Solicitors for your independent legal advice (ILA) requirements?
Expert ILA Solicitors for Director’s Personal Guarantee
Our team of expert ILA Solicitors specialise in advising directors on the full range of implications tied to personal guarantees. We offer:
- Same-Day Appointments: Time is of the essence. Our swift ILA service ensures that you receive the necessary advice without any delays.
- Online or In-Person Consultations: Flexibility to suit your situation. You can choose the mode of ILA consultation that best fits your schedule and preference and also the requirements of your lender.
- Fast Turnaround Time: Understanding the urgency, we prioritise a quick review of your ILA documents and advise you accordingly. We can offer same day appointments.
The need for correct Independent Legal Advice (ILA)
The complexity and potential repercussions of a Director’s Personal Guarantee require professional guidance from a Solicitor who has experience of this area of legal work. Our ILA service is designed to:
- provide comprehensive understanding of the ILA documents and their implications;
- protect clients from assuming obligations without a clear understanding of the risks;
- offer a detailed overview of the personal and financial liabilities in the agreement; and
- issue an Independent Legal Advice Certificate post-consultation, confirming that you have been apprised of the significance and consequences of your actions.
Legal and Financial Safeguards
Engaging with our Carter Bond’s ILA team offers not only peace of mind, but also a layer of financial and legal protection. By thoroughly understanding your obligations, you can make informed decisions that safeguard your personal and business interests. Further, our advice may reveal critical limitations and conditions within the guarantee that could be pivotal in your decision-making process.
YOUR COMMERCIAL LAW TEAM
Preea Jutla
Commercial Solicitor
e: preea@carterbond.co.uk
t: +44 0203 649 9016
Hammad Naveed
Partner, Corporate Commercial
e: hammad@carterbond.co.uk
t: +44 020 3475 2729
m: +44 07377 190 406
Reena Popat
Managing Partner
e: reena@carterbond.co.uk
t: +44 020 3475 2724
m: +44 07931 347 854
Kate Beech
Partner, Corporate Commercial
e: kate@carterbond.co.uk
t: +44 020 3093 0872
m: +44 07908 078 025
Paul Harris
Senior Associate Solicitor
e: paul@carterbond.co.uk
t: +44 020 3093 0873
COMMERCIAL HIGHLIGHTS
We were awarded the ‘Commercial Lawyers – London’, in the 2020 UK Enterprise Awards
WHY CARTER BOND
Partner Led
Unlike many law firms when we say partner or barrister led, we mean partner or barrister led. When clients work with us, they get constant access to the lead on their instruction. Yes, we have a team of solicitors and juniors for some of the groundwork and necessary research required by our clients, but this is when it makes financial sense to the client for us to do this. We provide constant contact at no extra cost as part of our service as most of our lawyers have their own business, so they know first-hand how important having a proactive, responsible and trusted partner on their side can be. And also how to work to a financial budget, and the way that legal decisions impact the wider organisation, which often requires balancing risks and competing interests.
Proactive Contact
Many ask us ‘what’s different about you?’ and we like to reply, ‘because we go the extra mile’. We see our work as building and maintaining good business relationships rather than just earning fees. How we do this is by keeping in constant contact with our clients and intermediaries. From pre to post instruction we ensure that our clients are informed of all legal issues that may impact their business and therefore lives. That is why we provide daily or weekly updates to ALL of our clients whether there is anything to tell them or not (we don’t charge for this we just see it as part of our service). We like our clients to rest peacefully knowing that when we are instructed, and we say ‘we will take it from here’ they know we mean it.
City quality, outer City fees
The world is changing, and many individuals are realising that lifestyle is as vital to them as is income. We are the lucky ones who can hand pick lawyers who can provide the best quality advice but at outer city costs. Our offices are in North West London which may not be the most salubrious in the market but at the same time this allows us to charge our clients for what they pay for, our advice NOT our office space.
ALL our lawyers have previously worked in large city-based law firms and continue to practise and offer the same high level service they provided to clients in the City but without the pressure and demands often dictated by City law firm. This allows us to be competitive on our fees without compromising our service.
All in all, our clients win, which is the way we like it.
Our knowledge and resources are yours
All our clients benefit from the same high level of care and attention whether the instruction is big or small. At the outset of each matter, we discuss the entire process with our clients, including the costs, potential outcomes and issues associated. This is to ensure clients are fully aware, knowledgeable and are in control always. Supporting and ensuring we provide the highest level of services, we offer our constant contact process with the partner or barrister leading your file, a document log in for matters which are for larger and more complicated instructions and on-going support post transaction should our clients require it. Our aim is not just to get the work done, but to make our clients’ lives easier as we do it, which is why we ensure that our clients have regular access to the resources they need from us.
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