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Personal Guarantee Insurance can aid a business transfer

Posted on 15th Dec 2015 11:57:44 in Personal Guarantee Insurance

We have recently been approached by a two directors of a company, who were looking for a solution to the problem of a departing Director who had given a Personal Guarantee for the borrowings of the business.

It is always an issue for any business where there is a departing shareholder or director who has in the past given a PG to a lender for borrowings, and that PG is still in place.

Many lenders will not countenance the handing back of that PG, as it will, in their minds diminish their security.

So how do you get around it. There might be an indemnity given by the remaining directors, to the departing party, but what is that really worth?

One way around it, and the solution we suggested to our client was to put in place Personal Guarantee Insurance in favour of the departing party, and to make that even more secure by assigning the benefit of the policy to the lender.

The departing party now no longer needs to worry that the lender might call on him in due course, as he has insurance to cover his potential call.