Read this first
A personal guarantee is a promise you made in your own name. It is not a company debt. Nothing that happens to the company changes it.
Not liquidation, not dissolution, not a sale. The guarantee survives all of them and the creditor can still come to you afterwards.
We put this on our own website because it is the single most common thing directors get wrong, and because the moment to deal with it is now, not later.
Where guarantees usually hide
Most directors have given more than they remember. They were signed years ago, at the point of getting the facility, when nobody was thinking about this.
- Bank facilities, overdrafts and term loans — and CBILS or Recovery Loan lending above the relevant thresholds. Not Bounce Back Loans; those did not permit them.
- Commercial leases — very common, and often for the whole term
- Supplier credit accounts, buried in the small print of the application
- Asset finance and vehicle agreements
- Card processing and merchant services
- Invoice discounting facilities
What to do about it
- Find out what you have signed. Ask each creditor for a copy. Do not rely on memory — almost nobody remembers accurately.
- Read the terms. Some are capped, some are limited in time, some cover only one facility and some cover everything. Some are joint and several with a co-director, which means either of you can be pursued for the whole amount.
- Get legal advice on it. Guarantees are occasionally unenforceable. That is a question for a solicitor, not for us.
- Tell us early. It changes what is achievable and it changes the terms. It will come out either way.
What we can and cannot do
We cannot make a guarantee go away. Occasionally a lender will release one as part of a wider settlement, but that is a negotiation with them and it is never automatic.
What we can do is make sure the company side of the picture is dealt with properly, so that whatever the guaranteed creditor is left claiming is as small as it can reasonably be. That is worth doing, and it is worth doing before the position deteriorates further.
If anyone offers you a transaction on the basis that it clears a personal guarantee, they are describing something that does not exist.