気ままなリライト４２

中小「経営者保証」制限へ

The Financial Services Agency is overhauling the guidelines on financing to challenge the long-held financial institutions’ business practice of holding business owners personally liable for their company’s business debts by enforcing a personal guarantee in the loan agreement. The revised guidelines scheduled to be applied from April 2023 are aimed at preventing financial institutions from requiring a personal guarantee from business owners as borrowers to secure the loan when many cash-strapped middle and small-sized company owners are scrambling to keep their companies afloat at the expense of piercing the corporate veil.
 
The revised guidelines are imposing tough regulations on banks seeking the enforcement of a personal guarantee to secure the loan. Banks are required to do mandatory reporting about how many cases of contracts make a personal guarantee come into play and how justifiable it is for them to require business owners to personally guarantee their business’s debts and how to make the scope for reducing their liability broader without relying on a means of security to make borrowers act as guarantors for the debt obligations of their business. The agency holds banks accountable with punitive action when they fail to commit themselves to handling what gets in the way of keeping a borrower’s liability limited without pursuing the borrower personally if the borrower’s business goes insolvent.
 
The guidelines enable the agency to check how convincing the appraisal process financial institutions have adopted is from the impartial side of view when a personal guarantee comes into play. The guidelines define three standard requirements for the protection of the corporate veil. A business owner as a borrower is entitled to the limited personal liability for the borrower’s business debts when there is a real separation between the company and its owner, the company is financially stable, and the company makes the accurate, appropriate records of important decisions available to the public at the right time. When a financial institution justifies itself imposing personal liability on a business owner as a borrower, the financial institution has to be held accountable for how the borrower fails to satisfy each requirement or which requirement falls short or what makes the limited liability protection apply to the borrower.
 
With 70 % of the middle and small-sized companies attaining a new business loan as a guarantor personally liable for their business’s debts in fiscal 2021, the loan secured by a personal guarantee is making it easy for banks to put business owners in a vulnerable position, putting their homes and other personal assets as collateral. The financial practice relying on a personal guarantee gives bankrupt companies little chance to demonstrate resilience as personal bankruptcy coming with corporate one erodes the credibility for a new business loan. The reluctance in financing because of corporate debts not secured by a personal guarantee is spoiling a chance to get companies suffering from the cash flow to the path of recovery.