Directors are often required to sign as Guarantor
for the obligations of a company but does
this make an individual personally liable?
I’m John Gallagher from Argon Law and in this video we will look at 5 things you need to know about Director’s Guarantees.
1 - Signing a Director’s Guarantee has vast
legal and financial consequences. If the company
is unable to meet its obligations, legal proceedings
can be instituted against the director who
signed as guarantor for the company. Legal
costs can accumulate, judgment can be obtained
against the guarantor personally, which may
involve the seizure and selling of personal
assets.
2 - As we have seen with the COVID-19 pandemic,
no company is immune to financial distress.
Personal Guarantees should never be given lightly.
3 - Credit applications presented to companies to open accounts often incorporate Director's Guarantees.
Make sure you seek professional advice before signing any such credit application.
4 - Many guarantees allow for the registration
of caveats over the real estate of the guarantor.
These clauses are referred to as “Charging”
clauses. Under the charging clause, guarantors
give an interest in their property as security
for the obligations owed by their company.
5 - As with Personal Guarantees, Director’s
Guarantees generally have no time limit. Resigning
as a director of a company does not automatically
terminate the Directors Guarantee. Normally
a release from the creditor is required and
the creditor doesn’t have to agree to that.
Please get in touch with us before you sign a Director’s
Guarantee and we will help you to understand
your obligations.
