The High Court is to hear a legal case to see if Funding Circle can pursue business owners under personal guarantees.

A debt purchaser, Azzurro Capital, has purchased approximately 10,000 loans from Funding Circle with an approximate face value £500m. Azzurro and Funding Circle have sought to enforce the personal guarantees but in a very interesting ruling the High Court struck out Funding Circles / Azzurro’s claim for summary judgement and enforcement under the personal guarantees.

The Judge argued that there was a more than arguable case that the “assignments” of the rights in the case were not legal assignments of the underlying debt. The Judge also commented that Funding Circle’s definition of a “lender” may have the effect of limiting the ambit the guarantee to a very narrow class of creditor that would not include Azzurro.  

In an interim ruling last year, the Judge said that the two guarantors had a real prospect of success in establishing that the money they had personally guaranteed was not payable to Azzurro or Funding Circle because of alleged problems with the documentation and processes.  

If you have any clients who are being pursued by Funding Circle under a personal guarantee then it is really important that they take their own independent legal advice!!!!!