When directors are being pursued under personal guarantees for a limited company debt, it can be incredibly difficult to take a step back and carefully consider your position and options. When overwhelmed by threatening and aggressive collection tactics, it is easy to simply give in to the immense feelings of pressure. This can lead to individuals making statements on the phone or in writing that could be construed to an admission of liability, or paying out incommensurately, just to silence the nagging voices.
The pre-action protocol for debt claims is one of the few measures in place to alleviate this issue and give individuals the time and space to properly consider their footing and resolve such matters amicably. This mandatory pre-legal procedure requires any creditor wishing to use the county court process to pursue sums from an individual personally (including sums allegedly owed under personal or director guarantees) to provide 30 days for them to assess whether or not they believe they are liable for the sums claimed and consider how they may be able to settle any amounts validly owed.
Unfortunately, we frequently see creditors attempt to circumvent this procedure with tactical choices of wording and emphasis. For example, law firm Sylvester Amiel Lewin & Horne LLP (working closely with Paladin on behalf of Travis Perkins) repeatedly issue threatening and intimidating letters that purport to be “Pre-Action Letters” demanding the full payment of crystallised sums within 7 days under the threat of imminent legal proceedings. By addressing these letters to the limited company but referring heavily to the personal guarantee liability, they create an illusion of urgency which can have a great psychological impact in making individuals feel that they are less than a week away from litigation.
The FSB’s super-complaint to the FCA in December 2023 referred to the way in which personal guarantees can foster an erosion of the concept of limited liability, and we seem to be seeing this occur particularly in the collection methods used by a variety of secondary lenders and builders’ merchants.
If you receive a letter like this or others, it is important not to panic. Take a step back and assess the substance. What is actually being said? Is it being said to you personally or to the limited company? Is it compliant with the pre-action protocol?
If you are being pursued by a secondary lender or trade supplier using aggressive tactics under an alleged guarantee, please contact us HERE
