Can a director, who personally settles a company’s debt as a result of a personal guarantee they provided, then reclaim from the company in administration the sums they paid under the guarantee for the amount the company owed to the creditor?

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Published by a ��˾��ҹ�� Restructuring & Insolvency expert

Published on: 05 February 2019

For general guidance on guarantor rights, see Practice Note: Guarantor rights and how to defer them in guarantee documentation—no competition clauses.

Right to an indemnity

As a general rule, the guarantor will have a right to be fully indemnified by the principal to the extent of any loss suffered by the guarantor as a result of paying out under the guarantee.

In a typical finance transaction, the right to an indemnity will arise either under:

•
an implied agreement, or
•
an express agreement

An implied agreement is the most common way in which the right to an indemnity will arise in a typical finance transaction. A right to an indemnity arises at law by implied agreement where the guarantee has been given at the express or implied request of the principal. In a typical finance transaction, the guarantee

Jurisdiction(s):

United Kingdom

Key definition:

Director definition

What does Director mean?

An officer of the company, usually registered as such at companies house, but may be also be a shadow or de facto director.

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