Bank calling in debt on company I left - but still guarantor

[helgawb]

I have received a letter from Nat West Bank regarding a £14,000 overdraft which was held joint and severally with two other directors of a company. I left the company in 2009 and resigned as a director. The two other directors (a husband and wife) continued to run the company, and I had nothing to do with it from then on. I asked them to remove me from the guarantee, and was assured by them that they would draw up a new agreement with the bank. I naively believed that this would be done, and was also told by the someone at the bank (I now know wrongly) that I could not remove myself from the agreement, that they, the remaining directors, would have to draw up a new agreement.

The company went into liquidation about 5 months ago, and at the time I found out I contacted the bank to find out what my situation was.They said that i was still a guarantor, and that I would be liable when the bank called it in. I argued that I had been told by the directors that they would remove me, and that I hadn't been aware that they hadn't. The person at bank collections said that they would try and remove me, they had checked companies house and could see I had ceased to be a director some time ago, and they would see what they could do. I continued to try talking with them, until I eventually lost track of them, got put on the phone with a new person at collections, who I explained the situation to. He said he couldn't even find me on their system, so he thought I must have been removed (!).

Now, I have just received a letter(as have the other 2 directors) asking me to pay the debt within 7 days. I obviously was never removed from the agreement, and what's more, have wasted several months when I could have tried to do something about it. Very stupidly, I have no records of conversations or anything in writing about any of this, as everything was conducted verbally. In retrospect, knowing what I know now, I would have written to bank when I first left, but I trusted the other directors. They did nothing, and now I am liable. I just need any advise or help as I don't know what to do next - I will write to the bank explaining all this, but am very worried about the debt - both on my credit record, and as they are asking for my income details, house value etc., on the form.

[unclebulgaria67]

This is a company debt and any debt in your name will relate to the company. Therefore I don't think they can note your personal credit record.

 

What happened with the liquidation in respect of the directors advising anyone (you) with any continuing liability to the business ? They should have been aware that you were still guarantor on the company overdraft. You may therefore wish to obtain some legal advice about whether you can take legal action against the directors for a relevant amount. How much was spent on the account, after you ceased to be director ? I would think that you can bring an action against the other directors for a relevant amount and perhaps some form of ruling about any liability you had as guarantor being limited/removed.

 

When you write to the bank, explain that you ceased to be a director of the company for x date and were given assurances by the other directors that they would take all necessary steps to remove you from all relevant accounts including the bank account in question. Just advise the bank that you will now be seeking legal advice about any action you may take against the directors of the company.

[BankFodder]

I'm afraid that I don't altogether agree with the above advice.

 

It is very normal for banks to take personal guarantees from the directors of companies in respect of loans taken out by the company.

In effect this means that the directors lose the protection of LTD liability status as the debt can then be pursued against the guarantors directly.

 

It is wrong to suggest that you might have removed yourself as guarantor. You would only be able to do this with the bank's agreement - and this would be very unlikely to be forthcoming unless the bank received something in exchange such as a replacement guarantor or an increase in the colateral that the bank might have been holding.

 

I'm sorry to say to you that if you did not understand all of this when you got involved with the company in the first place then to a certain extent you will have to accept some responsibility. Becoming a director is a serious matter and one should really try to understand the minimum principles about what is involved and also the liabilities which come with being a guarantor.

 

I think that you are in a very difficult position. You have an inescapable liability to the bank. If the other two are able to avoid the debt in some way then you could probably become liable for the lot.

You can't sue the company because it doesn't exist.

You could only sue the others for the return of your portion if you can show that they conducted the company in a negligent or dishonest way.

[Ganymede]

I'm afraid that I don't altogether agree with the above advice.

 

It is very normal for banks to take personal guarantees from the directors of companies in respect of loans taken out by the company.

In effect this means that the directors lose the protection of LTD liability status as the debt can then be pursued against the guarantors directly.

 

It is wrong to suggest that you might have removed yourself as guarantor. You would only be able to do this with the bank's agreement - and this would be very unlikely to be forthcoming unless the bank received something in exchange such as a replacement guarantor or an increase in the colateral that the bank might have been holding.

 

I'm sorry to say to you that if you did not understand all of this when you got involved with the company in the first place then to a certain extent you will have to accept some responsibility. Becoming a director is a serious matter and one should really try to understand the minimum principles about what is involved and also the liabilities which come with being a guarantor.

 

I think that you are in a very difficult position. You have an inescapable liability to the bank. If the other two are able to avoid the debt in some way then you could probably become liable for the lot.

You can't sue the company because it doesn't exist.

You could only sue the others for the return of your portion if you can show that they conducted the company in a negligent or dishonest way.

 

 

 

Agreed. If the OP was a director and a guarantor at the time the overdraft was taken out then he will still be liable. Any debts incurred by the company after his resignation are obviously not the OP's responsibility.

[Viz77]

Hi,

 

 

I have found my self in a very similar situation, but I did send a letter and called the bank to inform of my resignation of directorship and the company secretary had sent a fax asking for restriction of my access to the accounts as the parting was not amicable.

 

 

When I initially spoke to the bank they said I was not noted on any loan or accounts, later in the year when the company was look to fold they contact me as a guarantor. I really do not believe this to be fair treatment of a guarantor when both parties inform the bank and they do noting and keep me on a insurance policy. Please note that I have raised with FOS but have only gained a negative response, as BankFodder had said that the contract has tied me in, so...

 

 

1) I was wonder if helgawb had any joy with resolving the issue?

 

 

2) If anyone has any other suggestion on handling this situation with the bank in question Santander?

 

 

Thank you to all that are contributing.

 

 

I have received a letter from Nat West Bank regarding a £14,000 overdraft which was held joint and severally with two other directors of a company. I left the company in 2009 and resigned as a director. The two other directors (a husband and wife) continued to run the company, and I had nothing to do with it from then on. I asked them to remove me from the guarantee, and was assured by them that they would draw up a new agreement with the bank. I naively believed that this would be done, and was also told by the someone at the bank (I now know wrongly) that I could not remove myself from the agreement, that they, the remaining directors, would have to draw up a new agreement.

The company went into liquidation about 5 months ago, and at the time I found out I contacted the bank to find out what my situation was.They said that i was still a guarantor, and that I would be liable when the bank called it in. I argued that I had been told by the directors that they would remove me, and that I hadn't been aware that they hadn't. The person at bank collections said that they would try and remove me, they had checked companies house and could see I had ceased to be a director some time ago, and they would see what they could do. I continued to try talking with them, until I eventually lost track of them, got put on the phone with a new person at collections, who I explained the situation to. He said he couldn't even find me on their system, so he thought I must have been removed (!).

Now, I have just received a letter(as have the other 2 directors) asking me to pay the debt within 7 days. I obviously was never removed from the agreement, and what's more, have wasted several months when I could have tried to do something about it. Very stupidly, I have no records of conversations or anything in writing about any of this, as everything was conducted verbally. In retrospect, knowing what I know now, I would have written to bank when I first left, but I trusted the other directors. They did nothing, and now I am liable. I just need any advise or help as I don't know what to do next - I will write to the bank explaining all this, but am very worried about the debt - both on my credit record, and as they are asking for my income details, house value etc., on the form.