How to protect yourself in a limited company partnership

THE QUESTION

I'm going to purchase a furnished holiday let (FHL) through a limited company with a friend via mortgage. What terms should be made, prior to buying or considerations/ advice as this is the first time I've done this.

I'm looking for expert advice from a legal standpoint to safeguard myself and ensure the partnership is successful going forward.

THE ANSWER

What you will find is the reverse - mortgage lenders will be actively safeguarding themselves from you and your friend winding up your limited company at short notice and depriving them of the regular monthly payments of your mortgage.

You will both be required, as the shareholders of the limited company, to sign Personal Guarantees to make good any remaining debt (if any should remain) after the property has been repossessed and sold to recoup the lenders capital. You will further be required to receive independent legal advice to ensure that you understand your responsibilities in this respect.

From a legal standpoint with regard to safeguarding yourself, it would be prudent to get expert advice from someone qualified to give it, and from them alone.

Get a commercial solicitor to draw up a shareholder’s agreement, to give clarity on your respective responsibilities to the limited company and each other and, for example, to detail how to deal with one party wanting to extricate themselves from their limited company shareholding. Your commercial solicitor should also make you aware of anything else in relation to the safeguarding aspects.

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