Personal guarantee

[Briant]

A few years back I signed a personal guarantee for a loan I received from a non bank institution. The money was lent to a company I set up but it subsequently failed and all funds including personal funds and borrowed funds were lost. I have since started another business which is going reasonably well. Legal proceedings have been initiated against me personally for repayment of the funds which I dont have. Any income I have is going to repay bank loans which originated from the Celtic Tiger period. These loans have been restructured recently and I must deal with them over the next 10 to 15 years. Currently I have €100 per week surplus cash to live on etc.

Will legal proceeding be limited to me personally in terms of a court judgement or can the creditor go after the company that I have set up which is trading successfully?

 

[Branz]

Cant answer the exact question: MY guess is yes as I presume you own the shares in the company.
Any action, and your response to it, will be predicated on the extent of any unencumbered assets and free cash flow you have so it might help the discussion here to lay out your stall a bit more here by way of a case study: look around the site you will see examples: assets/liabilities, and income and expenses: not being factious here but the 100/week might be after monthly lease payments on an 2015 Audi 8

 

[44brendan]

The direct answer to your question is that legal proceedings can only be taken against you personally. The fact that you are a shareholder of a new company is largely irrelevant to this query. Other than that fact I would agree with irchoa's response.

 

[Jim Stafford]

can the creditor go after the company that I have set up which is trading successfully?

Legally any judgment creditor could go after your shareholding in a company by appointing a Receiver by way of Equitable Execution. However, such receiverships are rare for the following reasons:

• It involves a costly application to court.
• The "relief" being sought is "equitable" which means that the creditor must have exhausted all other possible avenues.
• Appointing an equitable receiver can raise issues of shadow directorship/personal liability for the receiver if he is not careful.
• If you only have a partial shareholding, then other shareholders would have pre-emption/blocking rights etc
• The banks do not want to be seen liquidating companies and causing job losses.
• In most SME's the goodwill is associated with the directors = no value in trying to sell the shares.

In practice, a judgment creditor will review the company to see if it can pay increased remuneration to you so that you can pass on the net pay to the creditor etc. They might also put you under pressure to place the company into a Members Voluntary Liquidation if it has significant retained profits.

Jim Stafford