There are likely to be several times during the life of a company that a director will be required to obtain Independent Legal Advice.
It is often forgotten that the directors of a limited company are not the same as the limited company itself. When the company is entering into a transaction that also involves the individuals, then a director guarantee is likely to be required to ensure that the director is also liable to meet the demands placed on the company.
What is Independent Legal Advice?
Independent Legal Advice is commonly associated with director guarantees, as discussed by Investopedia. Although the directors will be signing the loan on behalf of a company, if they are providing a director guarantee then there need to be additional safeguards in place to ensure that they understand what this means to them personally.
The lender will want Independent Legal Advice to be obtained to ensure that they can enforce any director guarantee if that becomes required.
Director Guarantee Requirements
Crucially, Independent Legal Advice must be given by a solicitor who is not directly linked to the loan itself either through the lender or the company. A qualified solicitor is essential for this aspect of the director guarantee to be valid. Specialist solicitors such as https://www.parachutelaw.co.uk/director-guarantee can provide both support for the company but also Independent Legal Advice for individuals.
When looking to obtain funding for a limited company, the need for a director guarantee and the linked Independent Legal Advice are almost guaranteed to be required. They should therefore be taken into consideration when it comes to engaging with professionals and planning the timeline for any funding.
Director guarantees are an important aspect of any bank lending and should be taken seriously by all involved.
