CG66033 - Losses: loans to traders: payments under guarantee: example

A Ltd, B Ltd, C Ltd and D Ltd have jointly and severally guaranteed a bank loan to E Ltd of £100,000.

E Ltd goes into liquidation and it is accepted that the loan has become irrecoverable from E Ltd.

On 1 October 1993 A Ltd pays £100,000 to the bank under the terms of the guarantee.

As at 1/10/93: B Ltd is in a position to meet fully

its liability under the guarantee

C Ltd’s position is such that only

£10,000 is recoverable from it

D Ltd is insolvent and about to go into

liquidation with no prospect of meeting

any liability under the guarantee.

The relief due to A would be:

	£	£
	Total paid		100000
Less	agreed payable by C Ltd	10000
	D Ltd	Nil	10000
	Amount to be divided between co-guarantors able to meet their contributions in full		90000
Less	payable by B Ltd		45000
	Relief due to A Ltd as at 1/10/93		45000