Independent Legal Advice - Personal Guarantee

Are you guaranteeing a loan or mortgage to a limited company? This usually means one thing – the lender will insist that you take “Independent Legal Advice” on signing the guarantee before making the loan.

We know you understand what a guarantee is, so it can be frustrating to be forced to take advice. However, for the lender, the guarantee may only be enforceable when Independent Legal Advice is given.

We work with all of the UK’s mortgage lenders and with many niche smaller commercial lenders.  Our mission is to provide your ILA as quickly and cheaply as possible and in the comfort of your home or office, via video conference call e.g. Zoom, Skype, Facetime or WhatsApp video calling.

We’ve helped thousands of people just like you with their Independent Legal Advice.

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More about Personal Guarantees

Personal Guarantees can be required for a variety of reasons, but often Independent Legal Advice is required when you’re trading as a limited company which is borrowing money or entering into a financial commitment, such as:

  • A mortgage – including buy-to-let ‘BTL’ mortgages, development loans, etc;
  • A start-up loan, or some other business loan;
  • A new company credit card or overdraft;
  • A lease of premises taken by the company requiring a personal guarantee;
  • A lease or HP agreement for a new company vehicle or business equipment;
  • An asset sale agreement or other forms of commercial contracts requiring a personal guarantor (for example to underwrite warranties given by a company).

Many people don’t see it in these terms, but in law, your limited company is a separate legal “person” to you. It can incur debts on its own behalf and in its own right, and, in the vast majority of cases, you’re not personally liable for the debts of a company as its director or shareholder – instead, you are said to be “behind its ‘veil’ or incorporation”, with no personal responsibility.

It can be very useful to trade as a limited company, as you can protect yourself from liability if things go wrong, but there’s a flip-side, in that your company is not itself a credit-worthy borrower, and it is unlikely to have significant assets of its own right. This makes anything other than very successful, long-established, “blue chip” companies, a significant credit risk for lenders and other counterparties to financial agreements.

Accordingly, most lenders (and a large number of landlords and other parties dealing with smaller limited companies) require, as a condition of entering into the lending arrangement, a director or shareholder (or in some cases several of them) to stand as guarantors for the borrowing company. The guarantees taken by lenders and other counterparties can:-

  • be in “all monies” form – i.e. for an unlimited in amount;
  • be for a limited sum;
  • cover current, existing and/or future liabilities;
  • be given solely by one guarantor, or by several, often on a “joint and several” basis.

Of course, the director or shareholder that’s asked to give the guarantee is often (although not always) well appraised of their company’s circumstances, and accordingly, often directors are reluctant to spend money taking legal advice being advised on a proposal of which they are acutely aware, often seeing it as superfluous. However, it’s important to remember that the ILA is given, ultimately, for the benefit of the lender or counterparty, and ensures that the director’s guarantee is enforceable by them, so that they don’t lose their money by lending to a company that turns out to be unable to repay.

Due to case law, guarantees often are not enforceable if Independent Legal Advice has not been given to the Guarantor, so most lenders in the UK insist that Independent Legal Advice is taken by anyone giving a director’s guarantee as a condition of the loan being made. Most lenders, for understandable reasons, will not deviate from the strict requirement that ILA must be taken in these circumstances.

By giving a Guarantee, the director or shareholder becomes personally liable for the monies borrowed by the borrowing company, or for the other financial obligations (such as leases and HP agreements) it enters into and which they agree to guarantee.

There can be circumstances where someone who is not a shareholder (i.e. owner) of a company, is asked to guarantee the debts of a Company, either in their capacity as a non-owning director of the company, or as a third party participant. Anyone facing this request needs to consider their circumstances very carefully, and may be advised (as a minimum) to seek cross guarantees and security from the borrowing company or from some other party. Our network of advisors can assist in providing the advice that will properly guide you through this process, and will ensure you’re put on the right footing.

Why may Independent Legal Advice be required?

Director’s and shareholder guarantees are very common in the commercial world and in most cases, they do not end in disaster for the directors signing them. However, lenders need to be sure that these obligations are enforceable, and consequently, Independent Legal Advice is generally required.

Due to the complexity of some commercial arrangements, taking Independent Legal Advice on a personal guarantee can often be needlessly expensive, and many law firms are reluctant to advise guarantors whatsoever in these circumstances, making it hard to find a solicitor that will provide the Independent Legal Advice you need.

At ILA Connect, we’re more than happy to help. We can arrange the advice you need rapidly, with minimum inconvenience, and at a reasonable price. Furthermore, very often we can arrange that Independent Legal Advice is provided to you in the comfort of your own home, by way of a short online meeting, at competitive rates, saving you money and wasted time.

How can I obtain Independent Legal Advice?

The circumstances surrounding personal guarantees can sometimes be complex and convoluted, but often the matters at hand are routine, and help is at hand from ILA Connect.

Our extensive experience places us in an excellent position to understand your requirements and your circumstances. We will arrange for one of our expert panel solicitors to provide Independent Legal Advice to you using our online meeting service, in the comfort of your home, at a convenient time to suit you.

If you’re happy to proceed, we will set up an appointment at a time to suit you with our panel solicitors and we can then certify to your lender that the formalities have been dealt with, thereby enabling them to proceed with the credit facility your company needs. At ILA-Connect, fortunately, we’ve made it quick, easy and convenient for you to receive ILA at a moment’s notice. Simply Book Now or get in touch with us at [email protected] or call our office on 0333 300 1879 and we get straight back to you!