VIC Can a business guarantor be forcibly removed?

[Zoe10]

I am a share holder in a business and a guarantor for a commercial loan supporting that business.
The other directors have acted oppressively towards me in many ways.
I am attempting to reach a reasonable buy-out of my shareholding, however the other parties continue
to bully and intimidate me and refuse to mediate/ negotiate.

The business is needing to refinance shortly, it's business loan that I am a guarantor of. I have been told by the bank, that as a guarantor, my signature is needed for any variations or changes to the business loan. I am hoping this may be the "leverage/ bargaining tool" for a reasonable buy-out offer to be negotiated.

My question then is - Can I be forcibly removed as a guarantor of this business loan (without my consent)?
What next steps could the other parties take if I do not agree to sign?

Any opinions or thoughts would be greatly appreciated.

Zoe

 

[Rod]

The bank can choose to close the loan, or subsume it into another loan without your approval. You are merely a guarantor based on your post and have little in the way of rights, and instead have an obligation. If the bank chooses not to deal with the other directors without your agreement, then the bank is effectively ceding you power that they can withdraw at any time.

Your leverage is mistreated by directors of a minority shareholder and possibly breach of a shareholder's agreement if one exists.

If you are cutting all ties, it would be prudent to also get yourself removed as guarantor.

 

[Zoe10]

Just to clarify the situation, myself and three other shareholders are guarantors in the business loan. The other three shareholders/ guarantors who have been acting oppressively towards me, are looking to refinance the current business loan. The other three shareholders/ guarantors are attempting to unreasonably push me out of the business. I am hoping to convince the other three shareholders/ guarantors to negotiate a reasonable buy-out of my shareholdings as well as potentially remove myself as a guarantor. The other three shareholders/ guarantors intention is to push me to sign my removal as a guarantor. Can I legally block the refinancing by refusing to sign any changes or variations to the business loan to force them to negotiate?

 

[Rod]

Mostly likely yes, though depends on what agreements you originally signed when you entered into the agreements. A forensic accountant might be needed to properly value the business.

 

[Zoe10]

Mostly likely yes, though depends on what agreements you originally signed when you entered into the agreements. A forensic accountant might be needed to properly value the business.

Thanks again Rod for your input. Sounds like you've quickly and accurately summed up the situation. Yes, agree a forensic accountant would be needed although I cannot even get normal financial disclosure. My hunch is there's a lot going on in the business that is not "above board" but I'm now in a weak financial position after they have sacked me and basically cut me off financially where I can't afford big legal costs and a hollow victory. Spoke to ASIC and they don't care as it is not in the "public's interest"

I really need blocking to sign the loan restructure to help get me out of this bad situation I'm in.

 

[Rod]

What sort of money are you talking? And what are they suggesting?

Consider using the small business commissioner for mediation.

 

[Rob Legat - SBPL]

You'll probably find in practical terms that the bank will get unnerved by your refusing to provide a guarantee - and the other shareholders will want to avoid that - unless they have a very good relationship with the bank and have clued them in to what's happening. The odds of that are likely to be low.

You're under no obligation to provide the guarantee, and it's entirely possible that the bank will refuse the variation without it. You have leverage. However, if a standoff happens and the whole deal sinks then you'll most likely have a worse position than you started with. That's no reason to agree to giving the guarantee - just something to be aware of.