Can I withdraw as a guarantor ?

Bank may only consider releasing a guarantor provided a replacement is made. This is very common when a partner or shareholder disposed off his entire shares to a 3rd party. The banks will only consider the new replacement provided the party who purchase the shares has better social position and stronger financial standing than the exiting guarantor. In real life, this is not an easy task and time consuming.

One of my client has a bad experience with a bank when he found a buyer for his shares in the company and has written to bank to seek consent for replacement before they transact. He has also provided the I/C and financial statements of the buyer for bank's evaluation. He was then informed by the officer that the bank is unable to process the request as they have not sign the shares transfer form. My client then executed all the forms (Form 32A & resignation as director) without the money changing hand. Today he is in a dilemma as the bank is holding on to his application.

Who need to provide personal guarantee ?

The following parties are normally required to provide their personal guarantee for bank facility granted to a Sdn Bhd :

1. Directors

ALL directors are normally required to provide personal guarantee for facility granted to a company. However bank may consider to exclude certain directors from providing their personal guarantee if they are not involve in the daily operation of the company AND their combined shareholding is not substantial, for eg. not more than 15%. Under this circumstances, there must be at least 2 guarantors in place. If a company has 2 shareholders cum directors, both directors are required to provide personal guarantee regardless of their shareholding.

2. Shareholders

For a shareholder not holding a directorship position, he will also be required to provide personal guarantee if he holds substantial amount of shares in the company. He may be excluded if he only hold, say, 5% shares.

3. Key-persons

There are instances where the key persons do not surface as a shareholder nor a director, but they are actually running the daily operation of the company. Bank will normally request them to provide their personal guarantee for their active participation in the business.

4. Spouse

It is very common for a bank to request for personal guarantee from the husband if the sole-proprietor is a woman. Borrower should try to convince banks that the husband has nothing to do with the business and exclude him to be a guarantor.

5. Third party

Sometimes an applicant knowing the weak financial position of his company may voluntarily offer a 3rd party with reputable background and sound financial standing as a guarantor.