Q&As

Where the sole shareholder of a company is also the sole director, can the company guarantee the obligations of the sole director?

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Published by a LexisNexis Corporate expert
Published on: 19 April 2018
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This Q&A considers whether the sole shareholder of a company who is also the sole director can approve the company guaranteeing the obligations of the sole director and the typical procedure for doing so. Produced in partnership with Gavin McNaughton, Lewis Silkin LLP.

For the purpose of this answer it is assumed that the company in question is a Private company limited by shares incorporated and registered in England and Wales, and that the guarantee in question was or is to be entered into on or after 1 October 2007.

A company with a sole director-shareholder can provide a guarantee subject to certain things (including that there are no restrictions in the company’s constitutional documents from providing guarantees) and provided the director-shareholder in his capacity as the sole member of the company approves the company’s entry into the guarantee of his obligations under a loan by way of an ordinary resolution, in accordance with the Companies Act 2006 (CA 2006).

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Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Private company definition
What does Private company mean?

A private company is not a public company within the meaning of the Companies Act 2006 and is prohibited from making any offer of securities of the company to the public.

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