Mr N owned and ran a successful retail business for many years, in 2016 following a health scare and wanting to enjoy more time with his family he sold the business to a friend of the family outright and ceased to be a director, shareholder, or play any part in the running of the business. The new owner of the business continued to trade for several years until the COVID pandemic brought about an economic downturn and coupled with rising costs it meant that in early 2023 the company entered liquidation.
In time Mr N was shocked and panicked to receive a letter from the bank that the company had and continued to bank with advising that he was personally liable for repaying both a £65,000 business loan that had been taken out since the business had been sold and the overdraft the company had which was approximately £14,000. Mr N quickly contacted the bank and advised them that he sold the company in 2016 and hadn’t had any dealings on its behalf since then. He offered to send them copies of the paperwork about the sale and hoped that would be the last he heard about the matter.
The bank then wrote again advising that they were still holding Mr N liable for the outstanding amount of approximately £79,000 under something called an “All monies clause”. Contained within a personal guarantee that he had signed when he was a director of the company. Mr N realised at this point that the problem wasn’t going to go away on its own. The impact and strain were devastating since retirement both Mr N and his wife had experienced some further health problems but had been enjoying a relatively comfortable retirement.
Mr N went back and forth via letter with the bank to no resolution, he approached a solicitor who advised him that there was no guarantee of a successful outcome and the costs of going to court to defend it would be prohibitive.
Personal Guarantees UK were recommended to Mr N by an old business acquaintance who had used us in the past. After getting in touch and engaging our services the first thing we did was check the validity of the claim against him which upon receiving the signed paperwork from the bank revealed that it was fully valid. The next thing we did was to conduct a thorough in-depth analysis of Mr N’s current financial position to get an idea of what the bank would find acceptable to settle the claim. Mr N and his wife owned their family home which still had an outstanding mortgage on it, only Mr N’s half of the equity in the house could be taken into account and after all our calculations in the event of legal action this amounted to just under £75,000.
We also established what Mr N wanted to achieve from our negotiations with the bank. As with the majority of our clients avoiding bankruptcy and formal legal proceedings were at the top of the list but given his health and the fact he was retired with no income bar pension and a part-time job his wife still had, it was important to Mr N that whatever was agreed with the bank to settle the liability was a clean break but the sale of the family home was to be a last resort.
Our proposals set out the entire set of circumstances for each individual client and enable the recipient (in this case the bank) to gain a full understanding of the position of the client and a transparent view on the level of the offer being made.
Finally, after lengthy correspondence and an increased offer the bank accepted an amount that equated to around 56% of the claim which Mr N immediately paid and closed the chapter on this very stressful matter.
We’ve chosen to share this case study for several reasons. It highlights what our unrivaled knowledge and expertise in the industry can do for our clients and how our personalised individual approach differs and gets better results, but it is also a cautionary tale. There are a number of things that you need to do as a company director when you sell or leave a business and one of these is that you must ensure any personal guarantee liabilities are removed or at the very least frozen at the point you leave. As our previous article explains, you do not want to find this out the hard way.
Here at Personal Guarantees UK from day one you are speaking to experts who have decades of experience in both the Insolvency profession and the intricacies of running businesses. We use that knowledge of both sides to help our clients achieve the best financial outcome and move on from what is always a worrying time. If we can help you with any personal guarantee issues then please get in touch on 0333 8801791 / info@personalguaranteesuk.com or fill in the contact form on our website and we will call you.
