Personal Guarantees By Directors

In a recent case, the Court of Appeal considered the validity of personal guarantees given by company directors to a bank in respect of the company's liabilities.  The case is National Westminster Bank plc v Alfano.

Background

In 2008 National Westminster Bank plc took over as bankers to Italian food supply company Ciborio Limited, a family business.  The bank provided a loan and overdraft facility and it was intended that the company would provide a debenture over its assets. In the event the debenture was never provided.

By early 2009 the business was experiencing cash flow problems. In February 2009 personal guarantees were given by six directors of the company, and two other family members, to cover the overdraft and to secure a further loan.