Personal guarantees if your company fails
A personal guarantee is a promise by a director, given to a lender, landlord or supplier, to repay a company debt personally if the company cannot. Banks, asset finance providers, commercial landlords and some trade suppliers commonly require them. While the company is trading the guarantee usually lies dormant, but if the company fails and the debt is unpaid, the creditor can pursue you personally for the guaranteed amount, which can put personal assets, including your home if it was used as security, at risk. The first step if your company is in difficulty is to find every guarantee you have signed and work out the total exposure, because directors are frequently surprised by how much they have guaranteed across different agreements. The good news is that guaranteed amounts are often negotiable once the company enters a formal process, and a practitioner or specialist adviser can help you deal with guarantees as part of the wider plan rather than in a panic. Insolvency Service; UK Finance guidance
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Total your exposure first
Directors routinely underestimate how much they have personally guaranteed across loans, leases and supplier accounts. Our personal guarantee exposure checker helps you add it up. Once a company enters a formal process, guaranteed amounts can often be negotiated, so do not assume the headline figure is what you will pay.
Are there personal guarantee loopholes?
Search for personal guarantee loopholes and you will find plenty of promises; the honest answer is that there is no magic escape, but there are real, recognised challenges worth checking before you pay. A guarantee may be unenforceable if it was not properly executed or you signed in the wrong capacity; if the lender materially changed the underlying deal, for example increasing the facility or extending terms, without your consent; if you were pressured into signing without the chance to take advice; or if the debt claimed exceeds a cap written into the guarantee. Expiry and release clauses are sometimes missed too. None of these is a loophole so much as the lender's own paperwork failing, which is why the first step is always the same: get the actual signed guarantee reviewed by a specialist before conceding the claim, and negotiate rather than ignore it.
Common questions
Will I have to pay a personal guarantee if my company is liquidated?
If the guaranteed debt is unpaid after liquidation, the creditor can pursue you personally. But the amount is often negotiable, and there may be defences, so take advice before agreeing to pay.
Can I lose my home over a personal guarantee?
Only if your home was specifically used as security for the guarantee, or a creditor obtains a charge through court. Many guarantees are unsecured. Check exactly what you signed and take advice.