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Original poster

Is friend liable to pay this buisness loan?

17 replies

Silverhorn · 15/08/2020 17:06

Friend A & B started a business together. They applied for a business loan and got it. Friend B has lots of family issues going on at home and has said they do not want to be apart of the business anymore as they cannot commit to it. The business is worth nothing at the moment.

Friend A is happy to carry on and take responsibility of the loan if friend B takes herself off the directorship and shareholder.

Friend B is worried that even if they do that she will still be legally responsible for the loan.

Friend A is saying she won’t.

Who is right friend A or B

Thanks

OP posts:
LordOftheRingz · 15/08/2020 17:09

If the co-signed the loan they are both responsible. They need legal advice to separate the business. Just because someone pulls out because of 'home issues' does not give them rights to walk away from loans taken out in good faith, should have thought about that. If other is prepared to buy her out she will need clear documentation and legal separation. If the business takes off under the single owner and all is not resolved I bet you would see the other coming back trying to get a bit of the action. Get a solicitor.

vagshapedbox · 15/08/2020 17:15

Friend needs legal advice. It depends on the status of the business. Is it a Ltd company?

vagshapedbox · 15/08/2020 17:16

Sorry pressed send too soon, and if a Ltd co is the loan in the company name or individuals?

RoadworksAgain · 15/08/2020 17:25

They need proper (maybe separate) legal advice - to protect both of them.

A needs to make sure B can't come back and make a claim on the business at some point in the future.

B needs to make sure she is legally separated from any financial responsibility for the loan and the business if it all goes tits up.

Original poster
Silverhorn · 15/08/2020 17:25

@vagshapedbox

Sorry pressed send too soon, and if a Ltd co is the loan in the company name or individuals?
Ltd.

Loan was for the business not individual

OP posts:
Skyliner001 · 15/08/2020 17:27

If ltd it's the businesses debt not theirs

Original poster
Silverhorn · 15/08/2020 17:30

@Skyliner001

If ltd it's the businesses debt not theirs
Thank you.
OP posts:
KnobJockey · 15/08/2020 17:33

Not always, they need to check their paperwork. Although the company may be liable for the debt, sometimes if it's a new business the owners are asked to be personal guarantors for it. Happened where I worked.

optimisticpessimist01 · 15/08/2020 17:38

Business debt, not attached to the individuals.

Original poster
Silverhorn · 15/08/2020 17:40

@KnobJockey

Not always, they need to check their paperwork. Although the company may be liable for the debt, sometimes if it's a new business the owners are asked to be personal guarantors for it. Happened where I worked.
That’s interesting. It was a government backed loan and it was pretty straight forward. I don’t think they were asked that but I’ll tell them to check paper work
OP posts:
KnobJockey · 15/08/2020 17:44

In that case it should be okay, the government backed those loans as secure

Youngatheart00 · 15/08/2020 17:47

If it was a Bounce Back loan or CBILS under the government scheme, the government guarantee benefits the Lender, not the company. Ie it only kicks in on insolvency. It’s not like they just default on the payments and the government bails them out and they continue trading.

But re the liability issue the Ltd company is a separate legal entity to an individual person. Unless either of the shareholders have issued personal guarantees in support of the loan, neither of them are personally liable.

Original poster
Silverhorn · 15/08/2020 17:52

@Youngatheart00

If it was a Bounce Back loan or CBILS under the government scheme, the government guarantee benefits the Lender, not the company. Ie it only kicks in on insolvency. It’s not like they just default on the payments and the government bails them out and they continue trading.

But re the liability issue the Ltd company is a separate legal entity to an individual person. Unless either of the shareholders have issued personal guarantees in support of the loan, neither of them are personally liable.

Do some of the Gov back loans require personal guarantees?
OP posts:
Youngatheart00 · 15/08/2020 18:14

Some of the banks were asking for them in the early weeks after the schemes launched. But I think it was pretty frowned upon.

Youngatheart00 · 15/08/2020 18:15

The smaller loans, bounce back, are 100% guaranteed. The larger CBILS are only 80% so some banks were asking for PGs to cover the remaining 20%

CatBatCat · 15/08/2020 18:23

The gov back start up loan I took out for my Ltd business was personal guarantee to me.

Check the paperwork

Original poster
Silverhorn · 15/08/2020 18:46

@CatBatCat

The gov back start up loan I took out for my Ltd business was personal guarantee to me.

Check the paperwork

Can I ask how much you were loaned if you don’t mind
OP posts:
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