Personal Guarantees and Company Insolvency: What Happens to the Director?
The company and the director are separate. A personal guarantee can connect them.
A personal guarantee is a legally binding commitment under which a director may become personally responsible for a relevant company debt if the company fails to meet the obligation. Guarantees can therefore expose personal assets to claims.
What this means for the director
Do not start with: "Will I lose my house?" Start with the document. Find the guarantee. Identify who signed it. Identify the creditor. Identify the facility.
Establish whether it is secured or unsecured, whether there are multiple guarantors, the amount outstanding and what the guarantee actually covers. Only then can personal exposure be properly considered.
What happens next
If the company cannot meet the guaranteed obligation, the creditor may look to the guarantee according to its terms. That does not mean every guarantee produces the same outcome.
The wording, security, amount, creditor action and the director’s own financial circumstances matter. Independent legal advice may be appropriate on validity, scope and enforceability.
Issues to establish
Who is the creditor? Where is the signed guarantee? What debt does it cover? Is liability capped or unlimited? Is it secured against a particular asset? Are there co-guarantors? What is outstanding? Has the creditor demanded payment? Has the underlying company facility been terminated? What personal assets and liabilities does the director have? Are there several guarantees across different lenders?
Guarantee exposure table
| What to establish | Where the answer comes from |
|---|---|
| Creditor | Facility documents |
| Guarantee | Signed document |
| Exposure | Current balance |
| Security | Charge and security documents |
| Other guarantors | Guarantee terms |
| Current action | Demands and correspondence |
Questions directors usually ask
Does limited liability cancel my guarantee?
No. A personal guarantee is a separate personal commitment.
Can personal assets be affected?
Potentially. Personal assets may be exposed.
Does company liquidation automatically make me bankrupt?
No. Company insolvency and personal bankruptcy are separate processes.
Related authority pages
General information disclaimer
General information only. Insolvency, tax and director-liability outcomes depend on individual circumstances. Nothing on this page constitutes legal, tax or insolvency advice. Where insolvency is suspected, advice from an appropriately qualified professional should be obtained promptly.
Establish your position
Do not estimate a guarantee from memory. Find it. Read it. Establish the debt. Establish the security. Establish the director’s wider position.