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Thread: Personal Guarantee on Ltd Co Overdraft - Enforceable?

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  1. #1
    tomnyy's Avatar

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    Default Personal Guarantee on Ltd Co Overdraft - Enforceable?

    Hi there.

    This is my first post but I have spent the past 3 hours trawling through the forum and seen how helpful some of the replies have been so thought I would post.

    I am being chased by Natwest in reference to a PG I provided on a business overdraft for a Ltd Co that has now been struck off at Companies House. I do not have a copy of the PG.

    I have recently engaged an IP with the intention negotiation and Full and Final settlement, but I'm curious about the legal position.

    The overdraft was renewed by the bank (after the initial 12 month term) but they then cancelled it about 6 months into the second 12 month term. The reason they gave for cancelling it was that the company had recently taken out an invoicing factoring facility with its sister bank RBS and that bank policy was that you couldn't have both.

    The overdraft agreement doesn't to my reading give them a blanket right to recall it any time but instead sets out a set of conditions called Events of Default and says that is any of those occur then they can recall it. However, I have a letter on headed paper (backed up with an email) from the Bank Manager saying that he confirms none of these occurred, and the only reason it is being cancelled is because of bank policy. In this letter he also admits that he didn't inform me of this, and apologises for that.

    I'm not denying the fact I signed the PG - obviously - but we were raising equity finance at the time and the bank cancelling the overdraft caused the investors to pull out and that obviously meant the company became insolvent. My argument is had they not done this we either would have traded out of the overdraft or the equity finance would have covered it.

    Looking forward to hearing your thoughts. Thanks in advance.

  2. #2
    wales01man's Avatar

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    Default Re: Personal Guarantee on Ltd Co Overdraft - Enforceable?

    Think its your Debt after all you gave a Guarantee has the bank been chasing you for payment?

  3. #3
    tomnyy's Avatar

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    Default Re: Personal Guarantee on Ltd Co Overdraft - Enforceable?

    They have been on and off for about 3 years.

    I did sign the guarantee, but I guess my question is did they legally recall the overdraft and if not then does that make the PG unenforceable?

  4. #4
    tomnyy's Avatar

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    Default Re: Personal Guarantee on Ltd Co Overdraft - Enforceable?

    Anyone else got any suggestions?

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    des8's Avatar

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    Default Re: Personal Guarantee on Ltd Co Overdraft - Enforceable?

    Is there any possibility that you can post up a suitably redacted copy of the overdraft agreement & the Bank manager's letter?

    When the company arranged the factoring facility was it warned that the overdraft facility would be cancelled?

  6. #6
    tomnyy's Avatar

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    Default Re: Personal Guarantee on Ltd Co Overdraft - Enforceable?

    Yes sure - they are attached.

    They didn't give me any warning - and they admit that in the letter.
    Attached Files Attached Files

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    des8's Avatar

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    Default Re: Personal Guarantee on Ltd Co Overdraft - Enforceable?

    Thanks,
    Certainly appears to me that the bank breached their contract, and failed to advise their client properly when the factoring was arranged (?breach of duty of care/fiduciary duty?)
    These are just pointers of the direction I would be looking at, to dispute their right to call in the PG.

    In fact, (bearing in mind we have only had brief details from one side!) I'd be considering a counter claim for driving the company under.
    As you are trying to negotiate over the PG I don't see that you have much to lose by going on the offensive

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    wales01man's Avatar

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    Default Re: Personal Guarantee on Ltd Co Overdraft - Enforceable?

    Worth researching the paper work from the bank and the Factor might make it clearer what happens to an overdraft when the business uses the factor worth trying to find a way out , difficult to see the Bank would be liable for the business failure might as well say the investors who pulled out are liable.

    If they are determined to get the 25K worth getting some legal advice from a specialist solicitor .

    I owed over £30k on a Business guarantee I too had a business fail when the bank failed to support us go ahead and get out of this Im behind you easy for banks to get bailed out but they like the rules to suit them

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    tomnyy's Avatar

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    Default Re: Personal Guarantee on Ltd Co Overdraft - Enforceable?

    Thanks for the comments. My thinking was that since the legal route would be quite expensive, it would be just as effective to use this to negotiate a very favourable full and final settlement to any claim they have over me?

    Would be interested to know whether a counter claim would have any legs though as Des8 has suggested.

    - - - Updated - - -

    May also be worth mentioning that I did go through the banks internal complaints procedure (unsurprising my complain was not upheld).

  10. #10
    wales01man's Avatar

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    Default Re: Personal Guarantee on Ltd Co Overdraft - Enforceable?

    If you want to do a Counter claim you need to put it in writing in a letter before action to the bank a give them a chance to respond . They may point out some thing in your contracts that stops any action you would need to put down figures and reasons for your claim to avoid instant defeat in a court .

    Hopefully those more knowledgable on here can advise what to put in the claim

  11. #11
    des8's Avatar

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    Default Re: Personal Guarantee on Ltd Co Overdraft - Enforceable?

    The point of mentioning the possibility of counter claiming, or pointing out possible breach of duty of care is to create a bargaining point.
    If the bank don't accept the breach occurred, you could make a complaint to FoS

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