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Non-director asked for Inv. Financing guarantee?

Is this normal? Been asked, as Head of Finance, to give a fraud indemnity to our Invoice Financier

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I've just started a new role (non-Director, but will be senior Finance head) at a small-ish (£4m t/o and growing) UK arm of a privately-owned international company, with HQ in the UK but shareholders overseas.  The outgoing Group FD has given an indemnity, alongside the Group MD, to the UK Invoice Financier - they are personally liable for any amounts advanced against fraudulent invoices.

I performed a similar role previously for a VC-backed medium-sized company with IF and this was not required either of me or the (Director/Shareholder) Group FD.

I've got no equity in the company, am not a statutory or titular Director (unlike the outgoing GFD), and this was not discussed at interview or offer.  I'm feeling a little backed into a corner right now...wanted to check if this sort of thing was at all normal / reasonable or not?

Thanks very much.

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11th Dec 2018 10:01

No, not normal nor reasonable for somebody in your role. Don't agree to it!

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to Wanderer
11th Dec 2018 10:09

Quote:

No, not normal nor reasonable for somebody in your role. Don't agree to it!

Ditto. Not your responsibility.

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By Mr_awol
11th Dec 2018 10:22

Although I kind of agree with the two posters above who say it isn't your responsibility, have you seen the specific terms of the previous guarantee?

it depends whether you are providing an absolute guarantee or whether the IF provider want your guarantee any fraud on your part only. Whilst I'd still be inclined to refuse*, as you've said you are the senior finance head and therefore one of the key risk areas .

* I can imagine my wife's response if I went home and told her we had to move as the MD of my new employer had fraudulently raised invoices that I hadn't spotted and we needed to sell the house to pay back (say) £600k that the MD had stolen

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By DJKL
11th Dec 2018 10:23

What extra will the company pay you, can you get to a price where you would be comfortable with taking the risk?

Pitch it to your employer at say an extra £500,000 p.a salary but be prepared to negotiate down to say nearer £400,000 p.a. plus they pick up cost of an all singing all dancing insurance policy covering your actions etc.

Everything has a price.

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11th Dec 2018 11:15

Under NO circumstances give the indemnity even if you have to change jobs for the following reasons amongst others

Private company
Overseas shareholders
You are not a director and have no actual control

When the dung hits the fan who do you think will be left without a seat holding the parcel - Muggins

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11th Dec 2018 13:15

Generally agree with the above, but could you mitigate the risk by asking them to confirm with you personally before advancing any funds (so you can check that the invoices are correct)

bit time consuming though...

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By tom123
11th Dec 2018 13:38

Do not do this. You have no upside, but only downside.

Wholly unreasonable of the finance company to expect an employee to be exposed like this.

Bear in mind that when it goes wrong (which it can) they will go after who is nearest, not who is to blame.

A friend got caught like this, and made bankrupt. Chairman pheonixed elsewhere apparently untouched.

This would still be my advice if they made you FD but still "employed".

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13th Dec 2018 10:38

Absolutely NOT!

As for being backed into a corner, I would say that it was not part of your contractual agreement that you would have to give an indemnity and do not consider it equitable as you are not a director with any control.
Trust no-one...

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13th Dec 2018 10:49

If they then say so OK we'll make you a director - NOW sign
Don't walk away RUN
Can you reveal the name of the invoice financier as I have experience in this type of situation?

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13th Dec 2018 10:53

Don't do it!

Parental company guarantee - normal
Director/Shareholder guarantee - normal for bank loan etc
Employee guarantee - never!

Just give the document to the Directors and state "they need a Directors guarantee"

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