Dáil Éireann Debate, Tuesday - 4 March 2014
61. Deputy Dara Calleary asked the Minister for Finance his views on recommendation 6.3.1 of the Entrepreneurship Forum report in relation to personal guarantees; if he has had any discussions with the Central Bank around this issue; and if he will make a statement on the matter. [10956/14]
View answerThe Central Bank's Code of Conduct for Business Lending to Small and Medium Enterprises provides that a regulated entity must not impose unreasonable personal guarantee requirements on borrowers. In addition, where a regulated entity seeks collateral or a personal guarantee to support a lending proposition it must explain clearly the possible implications for the guarantor of giving such collateral or personal guarantee. Any enforcement of a personal guarantee over a principal private residence must be in accordance with the Code of Conduct on Mortgage Arrears.
An SME is entitled to apply for a review by the Credit Review Office where the borrower considers that the terms or conditions attached to a credit facility or its price are so onerous as to amount to a constructive refusal. This could include unreasonable personal guarantees.
Personal guarantees make the guarantor liable in the event of the SME being unable to meet its liabilities and may make the guarantor personally liable for the debts of a limited company. I would strongly advise SMEs to ensure that they have independent expert advice on the possible consequences of giving personal guarantees.
