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Director's unsupported personal guarantees are occasionally requested by factors to support an invoice finance agreement. 'Unsupported' being a personal assurance to the value of X and not the charging of specific personal assets.
It is often the miss-conception of directors that where personal guarantees are provided this is merely to assure assistance to the factor in collecting in debts should the company cease to trade. Whilst this guarantee certainly
gives the factor the leverage to ask this of the directors and is a significant motivating factor in their request of these assurances, it should be very clear that a personal guarantee will give personal liability against the
funds borrowed. Whilst the factor will seek to collect monies in from debtors firstly, the factor is fully entitled to approach the directors for all or any of the amounts remaining outstanding.
Some factors will request director's warranties. These do provide director liability, although only in certain circumstances detailed in the respective document. These often relate to circumstances where fraudulent notification
of invoices etc has occurred. As such these are occasionally referred to as fraud warranties.
Blue Asset Finance does not profess to provide legal opinion and on these matters it is strongly recommended that you consult your solicitor before providing any personal warranty.
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