What is a Personal Guarantee?
Personal Guarantees are personal assurances of payment that are often required by suppliers, prior to them providing credit to customer companies. A personal guarantee is a legally enforceable agreement that means that if a customer company that has entered into a contract fails to meet its financial obligations, the personal guarantor (usually the company director(s) or any person who signed the guarantee) becomes personally liable to repay the debt.
Are Personal Guarantees enforceable?
Yes, personal guarantees are legally enforceable. This means that if the company that has entered into a contract and fails to pay its debt, the guarantor (being the company director/s or any other person who signed the guarantee) becomes personally liable to repay the debt.
What are the risks of a Personal Guarantee?
Giving a creditor personal guarantee exposes your assets to being available to satisfy your company’s outstanding accounts. Quite often, company directors are not sure whether or not they have signed personal guarantees and it’s only when their business is descending towards insolvency that these types of issues gain prominence. Always exercise caution and consider the implications of every document you sign. In particular, we recommend that you should seek competent professional advice before signing any order that requires a personal guarantee.
Dealing promptly with your problem
If you are experiencing financial stress as a consequence of having signed a personal guarantee, doing nothing can make your problem much worse. If necessary, TAP can act promptly in assisting you to determine the extent of your liability and if necessary negotiating a settlement with your creditor. Call us anytime for assistance on 1300 518 070.