Accountant looking for personal guarantee

RichieRuin

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I set up a limited company a year ago and engaged an accountant to help with registration etc. Now she's doing my accounts and she has asked me to sign a personal guarantee and indemnity to say that if for any reason my company cannot pay her fees, I will personally pay them. There is also other stuff about holding harmless and indemnifying the accountant against any liability blah blah blah -- isn't that what professional indemnity insurance is for?

I'm not overly bothered by it because the cost should not be much (I've done all the donkey work - receipts, VAT, etc.) and the company is solvent but I never heard of this before and I'm just wondering if it's standard procedure to ask for it. Isn't the whole point of a limited company that it's a separate legal entity and the directors are not personally liable for its debts?

On a side note, I'm also a bit ticked off about the way the accountant handled it -- it just came in the post without any explanation, just a compliments slip saying "please sign and return".

Should I just sign it and say nothing? Or refuse? Ignore? Get another accountant? She hasn't had to do much for me so far but what she has done has been on the ball to be fair.
 
Personally I will never sign a PG again, I made the mistake once and it took a long time to sort through pain and suffering.
I can understand it from her point of view but business is business and looking to move a business liability onto a personal level isn't a runner in my world.
If your particularly happy with her services and price then offer to pay a period in advance but don't sign up to a PG.
 
I set up a limited company a year ago and engaged an accountant to help with registration etc. Now she's doing my accounts and she has asked me to sign a personal guarantee and indemnity to say that if for any reason my company cannot pay her fees, I will personally pay them. There is also other stuff about holding harmless and indemnifying the accountant against any liability blah blah blah -- isn't that what professional indemnity insurance is for?

I'm not overly bothered by it because the cost should not be much (I've done all the donkey work - receipts, VAT, etc.) and the company is solvent but I never heard of this before and I'm just wondering if it's standard procedure to ask for it. Isn't the whole point of a limited company that it's a separate legal entity and the directors are not personally liable for its debts?

On a side note, I'm also a bit ticked off about the way the accountant handled it -- it just came in the post without any explanation, just a compliments slip saying "please sign and return".

Should I just sign it and say nothing? Or refuse? Ignore? Get another accountant? She hasn't had to do much for me so far but what she has done has been on the ball to be fair.

Is it an engagement letter she sent out to you- Tells who is responsible for what eg doing vat, paye/prsi etc.

What type of accounts are you getting done- Audit or Non-Audit.

If their is a personal Guarantee looked for- I would not sign it. A lot of it works on good faith in regard to honour to pay fee.

Better off to get new accountant as asking client to sign a personal guarantee at this stage shows very little faith in client.

No reason to sign one. Just refuse and if she does not want to deal with you without it, just move on.
 
Tell her to take a hike. You're a limited company for a reason!
Give her a personal guarantee for your personal tax return, by all means, but you're not going to be held liable for the company's debts.
Her fee is probably going to be high enough anyway - precisely because accountants expect a certain amount of bad debts.
 
Is it an engagement letter she sent out to you- Tells who is responsible for what eg doing vat, paye/prsi etc.

I got a letter but I don't recall it being called a letter of engagement, most of it was about my responsibilities. I just signed it and sent it back. Should have kept a copy but I never expected trust issues to arise with my accountant.

What type of accounts are you getting done- Audit or Non-Audit.

Audit, I think. She told me because it's my first year in business they have to be audited. Is that correct? Do I have a choice?

Better off to get new accountant as asking client to sign a personal guarantee at this stage shows very little faith in client.

Something else was bugging me about this and I hadn't quite put my finger on it, but you have hit the nail on the head - it's not exactly a vote of confidence is it?

Tell her to take a hike. You're a limited company for a reason!

That's what I thought too.

To give a bit of context we are a startup IT company with 2 employees. For the few months in question there are less than 200 transactions (including sales, purchases, and expenses), all of which are supported by documentation and itemised on a detailed spreadsheet. There were no wages paid during the period, and I did the VAT returns myself. So it's not exactly Zoe Developments she has to unravel. How complicated can it be?
 
If you are on time for Companies office you can get an non audit which is cheaper.
It sounds what you need done is very straight forward. no need to give any type of guarantee for either company or personal work. They are plenty accountants out their now so you have an choice. If she is looking for a guarantee now I would nail down a quote for work now and future years and them get an quote from at least two more firms to see if much of a difference in price.
 
The company does not necessarily need to be audited just because it is the first year of trading. If you were told that I would have doubts about your advisor's competence.
See CRO website for qualifying conditions for audit: [broken link removed]
 
The company does not necessarily need to be audited just because it is the first year of trading. If you were told that I would have doubts about your advisor's competence.

Emboldened by the replies here, I spoke to the accountant this morning. Apparently the PG is something the three accountancy bodies are encouraging their members to ask all clients to sign. It has come about because of the increasing number of people who are not paying their bills, but if I don't want to sign it there is no problem.

I asked her to clarify about the audit. I must have misunderstood what she said earlier, I am exempt. Looking forward to the day when I have enough turnover, assets, or employees to justify needing audited accounts :)
 
I am an accountant. I ask for personal guarantees from the companies that I act for.The way I see it if the company's directors refuse to sign the personal guarantee it indicates to me that at some stage in the future it is very possible that I will be left with a large debt and no my prices do not reflect a provision for large bad debts. Better off without this type of client. The attitude that prevails on this topic is that it is ok to set up in business, fail and leave a pile of debts after you. This is what has crippled many profitable business who have fallen at the hands of these fly by nights. Ask the many thousands of construction industry subbies burned by the reckless developers. I know there are many genuine cases where companies have failed but business people cannot expect their suppliers to assume the risk of a particular debt not being paid when they themselves will not assume this risk by providing a PG.
 
Personally I will never sign a PG again, I made the mistake once and it took a long time to sort through pain and suffering.
I can understand it from her point of view but business is business and looking to move a business liability onto a personal level isn't a runner in my world.
If your particularly happy with her services and price then offer to pay a period in advance but don't sign up to a PG.

I am an accountant. I ask for personal guarantees from the companies that I act for.The way I see it if the company's directors refuse to sign the personal guarantee it indicates to me that at some stage in the future it is very possible that I will be left with a large debt and no my prices do not reflect a provision for large bad debts. Better off without this type of client. The attitude that prevails on this topic is that it is ok to set up in business, fail and leave a pile of debts after you. This is what has crippled many profitable business who have fallen at the hands of these fly by nights. Ask the many thousands of construction industry subbies burned by the reckless developers. I know there are many genuine cases where companies have failed but business people cannot expect their suppliers to assume the risk of a particular debt not being paid when they themselves will not assume this risk by providing a PG.

+1

I find mrblues' post particularly disturbing.
 
+1

I find mrblues' post particularly disturbing.

Any particular reason why?
I've been there, partner in company deserted, left me with huge debts which we had both PG'd against, I lost my house, cars and pretty much everything of worth I owned - has taken me 8 years to rebuild my business and life but now i'm there and have it all again.
All I am saying is that there are other ways to be fair in business and i've stated paying a period in advance is fine once your happy with her work!
 
Any particular reason why?
I've been there, partner in company deserted, left me with huge debts which we had both PG'd against, I lost my house, cars and pretty much everything of worth I owned - has taken me 8 years to rebuild my business and life but now i'm there and have it all again.
All I am saying is that there are other ways to be fair in business and i've stated paying a period in advance is fine once your happy with her work!

I'm sorry to hear that you were "stitched up" by your former business partner. However, do you think it would have been fairer for the company's creditors to carry the can for the failure of your business?

Unfortunately, in the present climate it's easy for a professional to be a "busy fool". Like simplyjoe, I would view a reluctance on the part of a director to sign a PG as a fundamental lack of faith in the underlying strength of the business.
 
I'm sorry to hear that you were "stitched up" by your former business partner. However, do you think it would have been fairer for the company's creditors to carry the can for the failure of your business?

No, completely agree that the creditors shouldn't 'have' to carry the can but they do, its fact of doing business at this point in time. I also believe that where a business is doing its best to survive while more than likely being screwed by people not paying them that this should reside in the business and not move its way into personal lives.
Sadly many companies exist purely to make sure that their directors are protected while they recklessly trade paying no-one! The good guys shouldn't be punished or put into the same category.
I'll say it one more time, payment in advance for set work periods works and removes the need for anyone to have claim over the things that have zero to do with the business.
 
like simply joe & bateman, I too would would view a reluctance on the part of a director to sign a PG, esp for professional fees, as a fundamental lack of faith in the underlying strength of the business. In my job we have to date not actually asked clients to sign them, looking back we probably should have.
Limited liability is not there for people to set up companies, build up debt & walk away. it is important to note that limited liability applies to you only as a shareholder not as a director and in certain circumstances, trading recklessly or insolvently for e.g., directors can be made liable for some or all of the debts of the company. The ODCE has already taken some cases against directors of companies. so tread carefully, the veil of incorporation is not iron clad.
 
Absolutely no way would I sign a personal guarantee for anything to do with my company. Certainly never so that an accountant can be sure of their money. We don't look for personal guarantees off of our clients.

There are plenty of accountants out there who are not looking for personal guarantees, go with one of them.

We've been in business over 10 years and we are profitable. If you sign away what little rights limited liability offers you, be prepared to lose everything in court cases etc.

No way.
 
I am an accountant. I ask for personal guarantees from the companies that I act for.

Can I ask, simplyjoe, if you provide personal guarantees to your suppliers? Do you advise your clients to seek personal guarantees from their suppliers?

If I asked one of my customers to sign a personal guarantee before I undertook €2500 worth of work they would laugh at me. I can't imagine what would happen if I asked them to guarantee to pay any fees I imposed on them any time in the future, not to mention how they would respond if I did like my accountant and sent them a PG in the post to sign with no forewarning or explanation other than a note saying "please sign and return".

The attitude that prevails on this topic is that it is ok to set up in business, fail and leave a pile of debts after you. This is what has crippled many profitable business who have fallen at the hands of these fly by nights.

In my own case I have invested a 20-year redundancy package in my business and worked without pay for 9 months. My company owes nothing to anybody. All I did on this topic was inquire as to whether it was common for accountants to ask for a personal guarantee and if I should sign it. I asked for advice because, being new to running my own business, I wasn't sure what to do. The suggestion that I might be a fly-by-night is a bit of an insult to be honest.
 
Interesting to see what are perfectly correct referecne to the directors responsibilites/exposure in a limited company yet look at the banks (most directors are still there and no-one sued by anyone or brought to book - so much for directors taking responsibility :) ) Bit of thread i know :)
 
With every Tom, Dick and Harry having the gaul these days to seek PGs from their clients, what is the point of having limited liability if everyone else out there is seeking to undermine it by seeking PGs?
 
mtk totally agree with u about the banks. they have been seeking pgs for years and ppl have signed them with no thought to what they were actually signing. i bet the banks will call in every pg possible.
 
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