The Power of a PG (Personal Guarantee)

December 1st 2023

Personal Guarantee’s are an effective tool for Debt Recovery. If a debtor company won’t pay up, having a personal guarentee signed by a Director provides a direct route of access.

This means that what was originally a company debt, and therefore was essentially protected by the corporate veil, can be pierced, if the personal guarantee has been signed.

This may come as a shock to Director’s who find themselves being personally chased, particularly if they didn’t pay intricate attention to what they were signing. 

As long as there is a clear, signed copy of the personal guarantee available then this can be relied upon.

A Directors personal guarantee is a legally binding agreement whereby individuals agree to take the financial responsibility for a business loan. When the business defaults on payments, their personal assets can be used as collateral in order to repay the debt. In some cases, a Directors personal guarantee may be required even if the business can prove that it has sufficient cash flow or assets to cover the loan. This is because lenders tend to view loans backed by personal guarantees as having less risk than those without them.