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In the world of finance, there are few things more important than guarantees. A guarantee is a pledge to ensure that debts are repaid, even in the case of default.
This legal commitment is an essential tool for lenders, providing them with the peace of mind they need to offer loans and other forms of credit. With expert legal advice, individuals can protect themselves against the worst-case scenarios and ensure that their assets remain safe. As personal guarantee lawyers, we are here to help.
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A guarantee is a legal commitment to repay a debt where the original borrower has defaulted on their repayments. The guarantee entitles the lender to pursue the guarantor in a personal capacity (ie against the individual’s assets, including their residential property), if the original borrower defaults on the repayments. In essence, the person providing the guarantee will “step into the shoes” of the debtor on default.
For example, where a company seeks to obtain a loan, the lenders are likely to require that the directors of the borrowing company will provide guarantees for the repayment of the loan if the company is unable to do so.
A cross company guarantee may also be required when a subsidiary company borrows. This is where the lender seeks a guarantee from the parent company.
Given that lenders can secure the repayment of the original borrower’s loan against the guarantor’s personal assets, it is crucial that the guarantor seeks independent legal advice so that they understand the document they are signing.
Most lenders will not grant the loan until confirmation of this advice has been received as this avoids any future dispute regarding whether the guarantor understood the nature of the agreement in the event that the guarantee is enforced.
We are able to provide independent legal advice with regards to the terms of the guarantee you are looking to enter into, whether this be a standard or cross company guarantee.
We will meet with you promptly, either in our local offices of via video-call (subject to the lenders approval) and provide you with detailed advice on the practical implication of a guarantee that they are being asked to enter into.
At the end of the meeting, we will witness the guarantor’s signature (if face-to-face) and sign a solicitor’s certificate confirming that the legal advice has been provided. Thereafter, we will promptly send the documents to the lender ready for completion.
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The lender is unlikely to grant a loan unless it receives confirmation from a qualified solicitor that the advice on the terms of the guarantee has been given. The advice must be given for each specific guarantee.
Each person giving a guarantee will have to attend a meeting with the solicitor alone. If there are several guarantors, they will each have a separate meeting with the solicitor.
This will differ case to case; most lenders will require that the advice is provided in a face-to-face meeting, although some may agree to a video-call instead.
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