Becoming a director is one of the most exciting stages for an individual who is looking to set up their own company or has been asked to step into the role of director within an existing company; however, it is important for anyone who is a company director to consider the various implications. These include the duties they will perform and their position when it comes to giving a director guarantee.
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Becoming a director
Once an individual is appointed as a director, they are required to comply with the director duties as set out in the Companies Act 2006.
In addition to fulfilling certain company duties, there is the need to consider the impact on other areas of the life of a director. Banks or lenders to a company will typically look to obtain a director guarantee when they are lending money or offering credit, which is particularly likely when the company is new or has not yet developed a good credit rating.
Practicalities of a director guarantee
Although requesting a director guarantee is quite commonplace, particularly with new companies, this doesn’t mean it is an agreement that should be entered into lightly. It is always advisable to obtain independent legal advice on the personal issues associated with a director guarantee from a qualified solicitor such as https://www.parachutelaw.co.uk/director-guarantee.
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Even where it is not a requirement for the director to obtain independent advice when entering into a director guarantee agreement, this should still be something to look at. A director guarantee may mean that the personal assets of the director are at risk and the benefit of being a limited company could, to some extent, be lost. A director guarantee is often a necessary part of trading but caution is always needed.