How to protect Personal Guarantees when a company is insolvent

Many insolvent companies are being run to avoid the triggering of personal guarantees given by directors and owners.

Most personal guarantees are provided to secured creditors such as a bank to cover loans or overdrafts that are already protected by a debenture which provides for a fixed and floating charge over the company’s assets. In such cases the personal guarantee is often only triggered by liquidation when the bank is left with a shortfall.

In view of the above I am astonished how many directors plough on, stretching payments to HMRC and extending unsecured creditor liabilities without fundamentally improving their company’s financial situation via a company voluntary arrangement (CVA).

Secured creditors stand outside a CVA and therefore they have no need to call upon a personal guarantee.

I would urge all professional advisers, including accountants, lawyers and consultants to learn about CVAs since they are such a powerful tool for saving companies and in so doing avoiding personal guarantees being triggered.

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