What is a Personal Guarantee?


A personal guarantee is a promise that is usually provided by a director of a company, making the director personally liable for the payment of money or compliance with obligations on behalf of the company.

Quite often, parties are left chasing directors for the debts of the director’s company where a personal guarantee has been provided.

Some directors often overlook the fact that they have given a personal guarantee, which is a common mistake resulting from their failure to carefully read the fine print on contracts.

A lot of the time, commercial contracts include personal guarantees in the fine print of their terms and conditions or even just a subtle reference under the director’s signing clause stating they are signing in their capacity as director and in their personal capacity.

Once signing these contracts it will be very challenging for you as a director to avoid liability under a guarantee.

In short, it is extremely important to read and understand the terms of the contract before signing and if you do not understand, seek legal advice.


What to Do if You Have Provided a Personal Guarantee?


To prevent exposing yourself to personal liability, you should monitor and keep a record of the contracts where you have provided personal guarantees.

It is important to ensure that your company is keeping on top of payments to avoid liability under any guarantees you have given.

If your company fails to make its payments, be aware that creditors can seek judgment in Court against you personally.

If you are resigning as a director or selling the company, you should consider getting the guarantee removed.

You may do so by communicating with your creditors and formally withdrawing your guarantee, however, this can be a complicated matter.


Contact Us


For more information about personal guarantees, contact us at Bambrick Legal today. We offer a free, no-obligation 15-min consultation for all enquiries.

Read more about our Business and Commercial services here.

Related Blog – Ipso Facto Clauses: What You Should Be Aware Of Before Entering Into a Contract

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