Enforcing guarantees—key issues
Enforcing guarantees—key issues

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Enforcing guarantees—key issues
  • What is the nature of claim that a lender has against a guarantor?
  • Conditional payment guarantees
  • Pure guarantees
  • How to enforce a guarantee
  • When can a lender enforce a guarantee?
  • Does the lender need to enforce security prior to enforcing a guarantee?
  • Is it necessary to make a demand on the Obligor first?
  • Does the lender have to make a demand against the guarantor?
  • The stand-alone moratorium introduced by the Corporate Insolvency and Governance Act 2020
  • More...

Enforcing guarantees—key issues

Coronavirus (COVID-19): The Coronavirus Business Interruption Loan Scheme (the CBILS) and the Coronavirus Large Business Interruption Loan Scheme (the CLBILS) are schemes which were launched by the government in response to the pandemic with the aim of supporting SMEs and larger businesses with their access to finance. Under both schemes, lenders can take additional security and guarantees subject to certain rules. One of the rules in relation to personal guarantees has the effect that a lender can only make a demand under the guarantee once it has realised all other security available to it. The schemes closed to new applicants on 31 March 2021 and were replaced by the Recovery Loan Scheme (RLS), which launched on 6 April 2021 with the aim of providing financial support to businesses across the UK as they recover and grow following the pandemic. The RLS, which is open until 31 December 2021, also includes rules about when personal guarantees can be taken and on what terms. Under the RLS, recoveries under personal guarantees are capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of business assets have been applied. For more information, see Practice Note: Coronavirus (COVID-19)—implications for lending transactions—What are the implications for borrowers and lenders of the government and regulators’ response to coronavirus (COVID-19)?

This Practice Note

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