Reviewing a personal guarantee before you sign it

A personal guarantee makes a director liable, from personal assets, for a company debt. The document is short and in the creditor's form, and the points that decide the exposure are whether the liability is capped, whether it is continuing, whether it survives changes to the underlying deal, and how it is released. I review the guarantee from the guarantor's side and return it marked up with a written explanation of what it commits you to and the changes a creditor will accept, for a fixed fee of £495 in three working days.

Who this is for

Directors, shareholders and family members in England and Wales asked to give a personal guarantee for a company's lease, bank loan, asset finance, supplier account, franchise or contract, and want to know what they would be taking on before they sign. The guarantee is given by an individual to a business creditor; the guarantor's own protection comes from the document and the general law.

What to look for in a personal guarantee

What you are guaranteeing, and whether it is an indemnity

A guarantee must be in writing and signed by the guarantor to be enforceable under section 4 of the Statute of Frauds 1677, and creditors' forms describe the guarantor as 'guarantor and principal debtor' or add an indemnity, which makes the guarantor liable as a debtor in their own right even if the company's obligation turns out to be unenforceable. The review checks whether the document is a guarantee, an indemnity or both, what obligations it covers (this contract, this account, or all monies now or in future owed to the creditor), and asks for it to be limited to the specific obligation the guarantor has agreed to stand behind.

The cap, the interest and the costs

An uncapped guarantee exposes the guarantor to the whole debt plus interest and the creditor's costs of recovery. The review asks for a cap at a stated sum, for interest to be limited to the rate under the underlying contract and to a period, for costs to be reasonable and evidenced, and for the cap to reduce as the company pays down the debt or as the lease term runs. Where the creditor demands more than the guarantor's share of the debt, the review checks whether the guarantee is joint and several with other guarantors and what contribution rights exist between them.

Continuing guarantees and how you get out

Creditors' forms make the guarantee continuing, covering every future advance or order, and releasable only by the creditor in writing. The review asks for a right to terminate the guarantee for future liabilities by notice, so that the guarantor's exposure stops growing when they leave the company or cease to be a shareholder, for an express release on the guarantor ceasing to be a director, for release on assignment of a lease under an authorised guarantee agreement, and for a long-stop date after which no new liability can accrue.

The creditor's freedom to change the deal without you

The general law releases a guarantor where the creditor and the debtor vary the underlying contract without the guarantor's consent, and creditors' forms exclude that protection with a clause allowing the creditor to give time, vary terms, increase facilities or release security without affecting the guarantee. The review asks for the guarantor's consent to be required for an increase in the facility or the credit limit, a change to the lease or the contract that increases the liability, or a release of other security, and for notice of any default by the company so that the guarantor can act before the debt grows.

Spouses, co-directors and independent advice

Where a guarantee is given by someone who does not benefit from the transaction, a spouse guaranteeing a partner's business debt or a director guaranteeing a loan that benefits a co-director, the creditor is on notice of the risk of undue influence and must follow the steps set out in Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44, including ensuring the guarantor has independent legal advice, or risk the guarantee being set aside. The review identifies whether that applies, checks the certificate of advice the creditor requires, and advises the guarantor on what the certificate means for their ability to challenge the guarantee later.

Your home, security and what happens on default

Some guarantees are supported by a charge over the guarantor's home or a requirement to maintain assets, and the creditor's remedies on default include a statutory demand and bankruptcy. The review checks whether the guarantee is secured, whether the creditor must pursue the company first (it need not unless the guarantee says so), the notice the creditor must give before demand, and the guarantor's rights on payment: to take over the creditor's security and to claim from the company. The Late Payment of Commercial Debts (Interest) Act 1998 governs interest on the underlying commercial debt, and the guarantee should not add a higher rate.

What it costs

Standard review, £495. Marked-up document and a written explanation of the changes. Three working days.

Buying online forms the engagement on payment. The scope is what the contract review page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• Your own contract returned with my amendments as tracked changes, plus a clean version with every change accepted, ready to send to the other side
• Comments in the document where a point needs explaining
• A written explanation of what I have changed and why, by email or as an attachment if it is lengthy, marking the points I would hold firm on and the ones that are negotiable
• A view on what is normal market practice and what is the other side pushing their luck
• One round of follow-up questions by email, included

What is not included

• Negotiating directly with the other side, which I quote separately once I know who is on the other side. Where the other side is willing to share a live document, I can work in that document directly
• Drafting a replacement contract from scratch
• Advice on the law of any jurisdiction other than England and Wales
• Tax, accounting or regulatory advice
• Disputes about a contract that is already signed

Questions I am often asked

Can the creditor come to me before it has chased the company?

Under a standard guarantee, yes: the creditor can demand payment from you without first pursuing the company or its assets, unless the guarantee says otherwise. The review asks for a requirement that the creditor demands from the company first and gives you notice of the default before it calls on you.

I am leaving the company. Does my guarantee end?

Not unless the guarantee provides for it, and creditors' forms do not: the guarantee continues until the creditor releases you, and covers debts incurred after you leave. The review asks for release on your ceasing to be a director, or a right to end the guarantee for future liabilities by notice.

The bank says my wife has to sign too. What should she know?

That the bank must ensure she has independent legal advice, following Royal Bank of Scotland plc v Etridge (No 2), because she does not benefit from the loan, and that a guarantee signed without that advice may be set aside. The review advises on the certificate and on limiting her exposure to a cap.

Related guidance and services

• Contract review, £495, the service this page describes
• Shareholders agreement, £995
• Reviewing a trade credit account application with a personal guarantee
• Reviewing an asset finance agreement

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.