Personal Guarantees When a Company Fails
How personal guarantees can create exposure separate from the company's debts and which documents matter.
Published by Hedwyn Ltd. General information for directors of companies registered in England and Wales.
Does this sound familiar?
A bank, landlord, supplier or finance provider says you guaranteed the company's obligations. You do not remember whether the guarantee was capped, secured or amended. You are worried about savings, jointly owned assets or your home.
The short answer
Limited liability and a personal guarantee are separate. A valid guarantee may allow a creditor to pursue the guarantor if the underlying obligation and enforcement conditions are met. The wording, cap, security, amendments, demands, co-guarantors and surrounding circumstances all matter.
Company insolvency does not automatically mean that every guarantee is immediately payable, and it does not automatically mean losing your home. Obtain advice on the actual documents rather than relying on assumptions.
What may be urgent
- Find the signed guarantee and underlying facility or contract
- Record every demand and response deadline
- Check whether security was also granted
- Identify amendments, renewals and refinancing
- Obtain advice before admitting liability or signing replacement terms
What to avoid
- Moving assets to put them beyond creditors
- Assuming the guarantee ended when a facility changed
- Paying one demand without understanding other guarantees
- Signing a settlement or forbearance agreement without advice
- Treating company advice as advice on your personal position
Information to gather
- Signed guarantee and facility documents
- Variations, renewals and side letters
- Latest statements and demands
- Charges or security documents
- Details of co-guarantors
- A personal asset, liability and income summary for your adviser
Options that may be considered
Depending on the documents and circumstances, the debt may be disputed, negotiated, refinanced, settled or addressed through personal debt advice. These are individual legal and financial questions. The company and guarantor may require separate advice.
What happens next?
Start with I have signed personal guarantees, review director personal liability, or request a confidential callback.
Authoritative sources
This guide provides general information for directors of companies registered in England and Wales. It is not legal, financial, accounting or insolvency advice.
This guide is general information, not legal, financial, accounting or insolvency advice. See how our content is prepared.