Debt guarantee

Debt guarantee

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Companies A and B are under common control (with common directors) but not part of a group.

Company B is to borrow money and the lender wants a guarantee by Company A.

Is there any Companies Act prohibition on this? Also would this fall under a transactions with director gambit? Any other tax/disclosure/legal pitfalls? Thanks

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By johngroganjga
20th Oct 2014 15:21

It's clearly a transaction in which a director has an interest.

Companies guarantee other companies' bank borrowings all the time - although usually within group situations - so I can't see how there can be a Companies Act prohibition.

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By TerryD
20th Oct 2014 15:22

Yes, it would be perfectly allowable, but would need to be disclosed as a related party transaction in both company's accounts.

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