Purbeck Insurance Services, the UK’s only provider of personal guarantee insurance is supporting calls[i] to empower the shareholders and owners of small businesses to take legal action against firms that are to blame for their business falling into insolvency.
The call for a change in the law has come from the All-Party Parliamentary Group (APPG) on fair business banking. The Group has gone to the Supreme Court to seek a change in the law on so-called "reflective loss", which applies to losses suffered by individuals that overlap with the general loss of the company. The law currently states that only the company itself can bring a claim.
Todd Davison, Director at Purbeck Insurance Services said: “Thousands of small business directors and owners put their personal assets on the line to secure funding for their business – whether to get it off the ground, keep it afloat or to expand. In a recent survey of SME business owners[ii] close to half (47%) are simply looking to keep their business on an even keel this year while 38% are planning for growth.
“A business failing can have long term consequences for that business owner or director yet the current law offers little recourse for these hard-working, entrepreneurial people who shoulder the immense financial responsibility that comes with running over 99%[iii] of the UK’s private sector businesses. While Personal Guarantee Insurance can help mitigate some of the financial risks for directors who have taken a Personal Guarantee backed loan, we fully support the APPG’s calls for a change in the law to empower all small business owners with greater legal rights if their business fails.”
Personal Guarantee Insurance offers protection against the risk that the Guarantee is called by a lender and will offset any outstanding obligations called in under a Personal Guarantee. The level of cover is based on a fixed percentage of the Personal Guarantee the company director wishes to insure and this is dependent on whether the corresponding finance facility is secured or unsecured.
[ii] Censuswide Survey conducted March 2019 amongst 500 SME business owners across the UK
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