If cashflow is an issue, directors and shareholders can be tempted to enter into guarantees to the bank or to finance companies. Great care should be taken in these situations to ensure that you know what you are entering into. Although a limited company means that shareholders do not generally have liability for the debts of the company if it goes into liquidation, this principle is undermined when the shareholder/director has entered into a personal guarantee. Be very clear about.
We do provide advice to directors, shareholders and their spouses, partners and relatives who are being asked to enter into guarantees.
We also advise people who have already entered into guarantees as to how they may limit their liability or even avoid the claims.