Directors Personal Guarantee

A director’s guarantee is certainly legally binding under most circumstances and can be made as simply as you suggest, or you could buy a standard director’s guarantee letter online for a few quid. I’d suggest though that most company director’s would hesitate to provide such a guarantee unless you were providing a service that they couldn’t obtain in any other way.

Posted under Courier Financial Issues

Posted by Alec at 9:36 am, January 15, 2008

7 Comments so far

  1. Alec added on  January 15th, 2008 at 12:01

    Unless I’m reading that wrong I don’t think that you could call that a directors’ guarantee Peter – it’s just a ‘promise’ by the directors on behalf of the company that the company will do its best to pay you. It doesn’t seem to establish any personal liability on the the part of the directors if the company were to default. I could be wrong though.

  2. Alec added on  January 15th, 2008 at 12:45

    My point was that it’s not a ‘personal promise’, it’s just a promise on behalf of the company. In the same way a director signing your Account Application and agreeing to pay on your terms is signing and agreeing on behalf of the company without attracting any personal liability. A director’s guarantee is whole different kettle of fish.

  3. Alec added on  January 15th, 2008 at 13:49

    It’s got nothing to do with his position as director Nigel, it’s a personal guarantee given by someone who happens to be a director. Liability would continue even after the resignation of the director unless the other party to the contract (the supplier of credit facilities in your case) released him from the liability.

  4. Alec added on  January 15th, 2008 at 14:04

    He could fight it but he’d almost certainly lose. It’s a personal guarantee, he can’t just walk away from it. There’d be no point having it if it was that simple to get out of.

  5. Alec added on  January 15th, 2008 at 14:12

    Of course there’s no saying that the directors are worth anything in their own right anyway, so if the business failed their guarantees may well be worthless.

    Personally I’d have a look at credit insurance, or even non-recourse factoring, if I was thinking of offering extended credit terms. If you can’t get a credit line on the company then you need to think twice about risking your money.

  6. Alec added on  January 15th, 2008 at 14:35

    I’m a bit confused Peter, when you say “the Director’s Guarantee on our Application Form” do you just mean the phrase you quoted (” I agree with the terms & conditions and, in particular, I confirm that all Invoices will be paid within 30 days of the Invoice date”) or is there something on the application form where the director actually accepts personal liability?

  7. Alec added on  January 15th, 2008 at 14:58

    It wouldn’t stand up in court though. He’s just signing the form in his capacity as Director and agreeing to your terms ON BEHALF OF THE COMPANY. That isn’t a director’s guarantee and it doesn’t establish any PERSONAL liability. Well done for getting a result from it though.

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