Credit Check legality

[Eggbound]

Dont know if this is the right forum but here's the scenario:

A newly formed Ltd Company want to make a purchase in its first month but without a trading financial track record are unable to pass a credit check.

The credit check is run on an individual employee of the company instead (who may also be a director) in order to pass the credit check process and force the sale through.

What is the legality of doing this?

Any comment welcome...

[gravytrain]

Re: Credit Check legality

There is nothing stopping the prospective creditor searching the files of whoever he likes, although he should have their permission in theory.
If they then makes the sale to the company, only the company will be liable for repaying the debt not the individuals, irrespective of whos files were searched
However if the creditor gets one of the participants to sign a personal garantee on the strenghnth of the search that is different, in that case the named person be severely liable for the loan/ sale

[Eggbound]

Re: Credit Check legality

Thanks. Thats the problem I have, although I didnt sign any personal guarantee.

[gravytrain]

Re: Credit Check legality

Liability for the debt would be dependent on who the signature on the agreements was, or who the bill of sale was issued to.

[enquirer]

Re: Credit Check legality

If they run the credit check on an employee, and choose to extend credit to the company on that basis, that's their lookout. Unless some sort of personal guarantee is involved (either to the supplier, or to the company itself), there should be no problem.

However, directors can be held liable for company debts if they knew at the time that the company was trading insolvently.