Personal Guarantees & Director Liability

Jonathan Lea Network advises directors, shareholders, business owners and guarantors facing demands under personal guarantees, indemnities and security documents, and acts for lenders, landlords and suppliers enforcing them. We review enforceability and scope, identify procedural and substantive defences, assess whether the underlying security was properly enforced, and negotiate settlements where liability cannot sensibly be resisted.

A personal guarantee is a contract, and contracts have defences

Directors sign guarantees when the company needs a facility, then stop thinking about them until the company fails. A demand then arrives, often for more than expected, and sometimes from a party the director has never dealt with.

The instinctive responses are both wrong. Paying immediately gives up arguments you may well have. Ignoring the demand hands the other side a judgment and moves the argument to enforcement, where your options are far narrower.

We will review the guarantee and the underlying facility, tell you whether the demand is good, and advise on whether the right outcome is a defence, a negotiation or a structured settlement.

What do we look at when a demand arrives?

• Execution. Whether the guarantee was properly signed and witnessed, and whether the version being relied on is the version you signed.
• Scope. What the guarantee actually covers, whether it is capped, and whether the debt being claimed falls inside it.
• Variation. Whether the lender varied the underlying facility without your consent in a way that discharges you.
• Enforcement of security. Whether the lender realised the company’s assets properly and at a proper value before coming to you for the shortfall.
• The circumstances of signing. Undue influence, misrepresentation and non est factum arise more often than people expect, particularly where a spouse or a junior director signed under pressure.
• Notice provisions. Whether the demand complies with the guarantee’s own requirements as to form, timing and service.
• Limitation. Whether the claim has been brought in time.
• Co-guarantors. Whether others signed and should be contributing, and whether the lender has pursued them.

What happens where liability is clear?

The work becomes a negotiation, and negotiations in this area are usually more productive than guarantors expect.

Lenders and landlords generally prefer a certain recovery to a contested claim against an individual whose assets may be limited. Instalments, a discounted lump sum, the release of a charge over a home, a standstill while a property is sold, and contribution from co-guarantors are all achievable outcomes in the right case.

What weakens your position is engaging late, making partial payments without agreement, or transferring assets once a demand has been made. That last one can turn a debt problem into a claim that the transfer was made to put assets beyond the reach of a creditor.

Covid-era lending and connected claims

Directors are still receiving demands under guarantees given for pandemic-era facilities, and separately facing claims where a loan was applied to something other than the purpose certified.

These frequently arrive alongside a misfeasance claim from a liquidator, or a disqualification investigation. They need to be handled together rather than separately, because what you say in answer to one will be read in the others.

See also Director Misfeasance & Insolvency Claims and Director Disqualification.

For lenders, landlords and suppliers

We act on the enforcement side as well. We will review the guarantee and the security, advise on the demand and the sequence of enforcement, and give you an early and realistic view on whether the guarantor has anything worth pursuing. Where the answer is a negotiated recovery rather than proceedings, we will tell you that at the outset.

How we can help

Send us the guarantee, the underlying facility or lease, the demand and any correspondence with the lender. We will tell you whether the demand is good, what defences are realistically available and what a sensible negotiated outcome looks like.

FAQs: Personal Guarantees & Director Liability

Do not pay, and do not ignore it

Send us the guarantee and the demand before you respond. We will tell you whether the claim is good, what it is really worth and what your realistic options are.

Contact Us

We provide most enquiries with an indicative scope of work and fee estimate, based on the information you share. We aim to respond within one working day.

In the same email, you will be invited to arrange a 20-minute complimentary, no-obligation video consultation, should the proposed scope of work and fee estimate be of interest. This initial discussion is designed to help us better understand your requirements, refine the scope of work and ensure our approach is fully aligned with your objectives.Following the call, we will email you a definitive, formal fee estimate for you to consider and approve.

Where you would prefer to receive initial advice and guidance from the outset, or where a short introductory call would not be the most appropriate starting point, we may instead recommend a 2.5-hour fixed-fee appointment, starting from £750 + VAT. This enables us to review the information you provide, discuss your situation with you and provide considered, tailored advice at an early stage.

To make an enquiry, please email us at wewillhelp@jonathanlea.net, complete our contact form, or call us on 01444 708640.