So, what is the meaning of a director’s personal guarantee, and should you sign it? A director’s guarantee can be a blessing or a curse, depending on your circumstances.
In the video below, commercial solicitor Will Conway explains what a director’s guarantee makes you liable for, its risks, and when you should seek legal advice from our trusted team.
What Is a Director’s Guarantee? Transcript:
A bank offers your company a loan, but they want a personal guarantee from you as the director. Should you sign? Let’s break it down.
A director’s guarantee makes you personally liable if the company defaults. Even if your business is a limited company, your personal assets, your home, your savings, and even your future earnings could be at risk.
Lenders often use standard form guarantees, but some contain particularly harsh terms, which can include all monies clauses, making you liable for future debts, not just the loan in question. With joint and several liability, meaning if there are multiple guarantors, the lender can demand 100% from any one of you or waivers of defences, stopping you from arguing against enforcement, even in unfair circumstances.
You can try negotiating, but lenders rarely remove their requirement of a guarantee altogether. The best approach is to limit your liability, capping the guarantee amount, setting an end date, or excluding future debts.
Signing a director’s guarantee is a serious commitment. Understand the risks, negotiate where possible, and get legal advice before putting pen to paper.
Seeking Advice on a Director’s Guarantee?
If you require more information on what a director’s guarantee is in the UK or legal guidance on signing one, please don’t hesitate to get in touch.
Our team are well-versed in a wide range of business legal services and aims to provide the appropriate guidance you need to move forwards.