Working with a director to reduce his liability under his personal guarantee
We were originally introduced to this failing company by the bank. This company had been purchased three years earlier by the directors but a difficult trading environment meant the company never made anticipated profits. As a result, the directors looked for a way out yet it was clear that the obvious choice of a solvent trade sale would not be possible; it was highly unlikely the bank would lend money to finance the purchasing of the company. The directors had personally guaranteed borrowing from the bank and, based on a break up value of stock and assets, had a potential liability of £75,000.
Initially we advised the directors to look for a trade buyer for the business. Unfortunately, though interest was expressed, a transaction never took place. The directors eventually decided to place the company into liquidation after mounting pressure from the creditors. Following this decision, the directors, under our guidance, held a liquidation sale of the stock. As a result, the stock was sold for a much higher price. Consequently the personal guarantee reduced to £25,000.