A limited company is a separate entity to that of the Directors. As a Director, you are not personally responsible for any debts of the company. However, on the other side, it means that some companies will not provide you with credit cards, etc without the personal responsibility of the Directors.
Therefore, many lenders will want the added security that their money will be repaid. To do this however they will require a solicitor to give independent legal advice to ensure that the Director has the full knowledge of what they are effectively “signing up for” and the consequences should the company not be able to service that debt.
It may be that a Director is asking to give a guarantee for:
- A set amount of money
- Future obligations
- Current or existing obligations
A Director is usually aware of the current situation of the company and may realise that without their guarantee that the company may not be able to progress or obtain a loan to help their financial situation. They may therefore not feel that they need an ILA. The lender, however, will require the guarantee to ensure that any repayments can be enforceable against them.
It is important therefore to ensure that you sit and listen carefully to the independent solicitor and let them explain the terms of the agreement before you proceed to sign.
