Directorship advice

wheretogo?

Hi there eveyone,

noob here but I need some advice, currently I am a director and 50% shareholder for a ltd. company however it was as a favour for a relative, not off my own back and also signed the gaurantee on the full 100% of the loan and overdraft facility with the bank, however I am now worried about the company and having checked it out, the overdraft is maxed out with some of the loan used also:(. As mentioned I am not really involved with the comapny and was a favour to get it off the ground. I however coped on about a month ago and told the relative to find someone to replace me that has an interest in the company and can take the burden it isn't fair for me to take full risk - silly looking back now but was told the company would be making profit from day one. I realise that companies rarely make net profits in the first year of business but I don't see any future in the company. The probelm is after agreeing I would be relieved of the gaurantee it has been a month and I have been told these things take time by the relative, I'm sceptical and think there are in serious financial difficulty and are just bluffing regardless I assume this is the change of ownership not the gaurantee of the loan? The gaurantee is the only real issue I don't want any part of the company so the share will be given back with no fuss so I don't see why the gaurantee can't be taken care of first?

Essentially I want to know if changing the gaurantor of the loan could take this long or am I being led along?

Thanks for the help and any advice might settle my nerves a bit!

ruselinthebush

Hi was looking to set up a thread myself and came across your thread. I think you are in a bit of trouble not with the company but with with the loan I think the first thing you should do is contact a solicitor for legal advice regarding the loan. The company can change directors quickly but I wouldn't advise that yet as its a Ltd company so they can't take anything from you if you haven't put in any capital.
Sorry I couldn't help you more but hopefully this will get the thread going and somebody may advise you better on the legal side.

antoinolachtnai

Obviously you need specific professional legal and possibly commercial advice in relation to this situation.

The issue as regards the guarantee is with the bank. You have made an agreement with the bank that you will pay back the loans if anything goes wrong. The bank is depending on this guarantee. It is unlikely the bank will agree to remove you as a guarantor on the loan without the loans (including the overdraft) being fully repaid.

In terms of the company, I presume there is no shareholders' agreement governing what will happen in case of a disagreement between you. The main control you have here, if the worst comes to the worst, is to liquidate the company. Debts will obviously be outstanding, and you will be fully responsible for them, alongside your co-director assuming he also signed the guarantee. This would be a very bad situation, however, this might not be the worse possible situation, if it avoids any further drawdown of funds.

You really need to tread very carefully here, to avoid causing a panic with the bank. If the bank senses trouble, they might appoint a receiver right away and close everything down. I have no idea from what you said what the commercial situation is although you are pessimistic about it. It is possible that your co-director can trade out of the situation if he has space.

You are going to need to get good legal, and if possible, commercial advice specific to your situation. Obviously you need to think about how you can avoid causing a lot of family rancour.

TheCostumeShop.ie: Ronan

As the folks said get some legal advice, in the mean time.

Obviously you should sit down with the owner first and talk to them but business is business, so no emotions allowed. Get the latest management accounts up to date, speak to an accountant if you can't read financial reports and work out if the venture is viable at that point in time.

If the numbers don't stack give notice to the owner and to the bank that you intend to notify the bank of your withdrawing the guarantee in 6 months time (check your papers but it's usually 6months notice). Basically unless they pay back the loan, your name can't be taken off it unless someone else can replace you as the guarantee - which is unlikely as the reason you are getting out is the business isn't preforming. Also request the bank not issue any more funding in your name so things don't get worse. As said this can topple a business, but if it does chances are it wasn't going anywhere and they we're being straight with you.

When you say you the guarantee is the only real issue it indicates that you're not fully aware of your role as a company director, you signed the paper so you really need to talk to an accountant to explain what your role is. It's not just the bank loan you may be liable for here.

If there is reckless trading going on and your PARTNER is taking on debts (stock etc) he resonably should know he can't afford to pay back the limited liability might not stand. I have no reason to think there is reckless trading other than you being involved for over a year and having no knowledge of the loan situation means you didn't have an AGM or read the annual reports. Even if it did and the business goes bankrupt the you would suffer a lot for example Currently if a business person is declared bankrupt, you cannot obtain a loan for more than €630 without disclosing their status as bankrupt.

Not trying to scare you and hopefully everything is fine, but you need to take a hands on approach with the business and your affairs here. Better safe than sorry.