If you are searching for personal guarantee company liquidation advice, you may be worried that your company’s debts could become your personal responsibility.
A limited company is normally a separate legal entity, which means directors are not usually personally liable for its debts. However, the position may be different where a director has signed a personal guarantee.
If your company enters liquidation, the guarantee will not normally disappear. The lender may still be entitled to pursue you personally for some or all of the outstanding balance, depending on the wording of the agreement.
This guide explains how personal guarantees work during company liquidation, when a lender may take action, what assets could be at risk and the steps directors should consider taking.
Does liquidation cancel a personal guarantee?
No. Placing a company into liquidation does not normally cancel a personal guarantee.
A personal guarantee is a separate legal agreement between the person giving the guarantee and the creditor. It generally provides that the guarantor will personally repay the relevant debt if the company fails to meet its obligations.
The Insolvency Service describes a personal guarantee as a legally binding agreement under which a director personally repays a debt if the company fails to do so.
When a company enters liquidation:
- The company debt is dealt with through the liquidation.
- The creditor can submit a claim in the liquidation.
- The creditor may also consider whether it can rely on the personal guarantee.
- The director may receive a separate demand for payment personally.
You do not automatically become responsible for every debt owed by the company. Your liability should be limited to the debt or obligations covered by the guarantee, subject to its precise wording.
What is a personal guarantee?
A personal guarantee is an agreement under which an individual agrees to become responsible for a company’s debt if the company cannot pay it.
Personal guarantees are commonly requested in connection with:
- Business loans.
- Bank overdrafts.
- Asset finance and hire-purchase agreements.
- Invoice finance facilities.
- Commercial property leases.
- Supplier credit accounts.
- Corporate credit cards.
- Other business finance arrangements.
Lenders, landlords and suppliers often request guarantees where a company has limited assets, a short trading history or a weak credit record.
The guarantee might have been presented as a separate document. However, it could also have been included within a longer facility agreement, lease or set of terms and conditions.
Directors should not rely solely on what they remember signing. The complete documents should be obtained and reviewed.
Are all personal guarantees the same?
No. The wording and extent of personal guarantees can differ considerably.
A guarantee may be:
Capped
A capped guarantee limits the amount for which the guarantor can be pursued.
For example, a company might borrow £100,000 but the director’s guarantee may be limited to £25,000.
However, the guarantee may also cover interest, legal expenses and enforcement costs in addition to the stated limit. The actual wording needs to be checked.
Unlimited
An unlimited guarantee may cover the entire amount owed by the company, potentially including interest, charges and recovery costs.
Some agreements contain an “all monies” provision covering several present or future liabilities owed to the same lender.
Secured
A secured guarantee may be supported by a charge over a personal asset, such as a property.
This may give the creditor additional rights against that asset if the guaranteed debt is not repaid.
Unsecured
An unsecured personal guarantee is not initially supported by a particular asset.
However, this does not mean it can be ignored. The creditor may still pursue a personal claim and, depending on the circumstances, personal assets and savings may be at risk. The Insolvency Service also warns that bankruptcy may be possible if a guarantor’s assets are insufficient to meet the debt.
Joint and several
Where several people have signed a joint and several guarantee, the creditor may be able to pursue one guarantor for the full guaranteed amount rather than dividing the debt equally between them.
The guarantors may have separate rights between themselves, but that does not necessarily restrict the creditor’s initial claim. The Insolvency Service specifically identifies joint and several guarantees as agreements under which multiple guarantors can be liable for the full debt.
When can the lender enforce the personal guarantee?
A creditor does not always have to wait for the company to enter liquidation.
The guarantee may become enforceable when a particular event occurs, such as:
- The company missing a payment.
- The company breaching the finance agreement.
- The lender formally demanding repayment.
- The facility being withdrawn.
- The company ceasing to trade.
- The company entering liquidation or another insolvency process.
The exact trigger will depend on the terms of the guarantee and the underlying agreement.
A demand should not be ignored. However, directors should also avoid immediately accepting the amount claimed without checking:
- That the guarantee applies to the particular debt.
- Whether the guarantee is capped.
- Whether interest and costs are included.
- Whether the correct notice has been given.
- Whether the creditor holds other security.
- Whether there have been previous payments or recoveries.
- Whether more than one guarantor is involved.
Where there is any doubt about the validity or enforceability of a guarantee, specialist legal advice may be required.
Can the lender take my house?
A personal guarantee does not mean that your home is automatically lost when the company enters liquidation.
The level of risk depends on matters including:
- Whether the guarantee is secured against the property.
- The amount owed.
- The amount of equity in the property.
- Whether the property is jointly owned.
- Your other assets and liabilities.
- Whether an affordable agreement can be reached.
- The enforcement action the creditor decides to take.
Where a creditor already holds security over a property, the position can be more serious.
Where the guarantee is unsecured, the creditor would normally need to pursue its personal claim before taking enforcement action against assets. However, personal property, vehicles, savings and investments can potentially be exposed, and bankruptcy may ultimately be considered in serious cases.
This is why advice should be obtained before assuming either that the house will definitely be lost or that it is completely protected.
Should the company repay a personally guaranteed creditor first?
Directors need to be extremely careful about using company money to repay a debt simply because they have personally guaranteed it.
Once a company is insolvent, directors’ responsibilities shift towards protecting the interests of creditors. Government guidance states that directors should protect company assets, avoid worsening the position of creditors and treat creditors fairly.
For example, suppose a company owes:
- £40,000 to HMRC.
- £30,000 to suppliers.
- £25,000 to a bank that holds the director’s personal guarantee.
Paying the bank in full while leaving HMRC and the suppliers unpaid could personally benefit the director by reducing the guaranteed debt.
Depending on the circumstances, that payment could be examined by a future liquidator as a possible preference payment.
Directors should therefore take advice before:
- Paying a personally guaranteed lender ahead of other creditors.
- Transferring company assets.
- Selling assets to themselves or connected parties.
- Repaying money owed to directors.
- Using company money to reduce personal exposure.
The fact that a director is worried about a personal guarantee does not permit them to place their own interests ahead of the company’s creditors.
Can a personal guarantee be negotiated?
Sometimes.
A creditor may be prepared to discuss:
- An affordable repayment arrangement.
- A temporary pause while the position is reviewed.
- A reduced lump-sum settlement.
- Refinancing.
- The orderly sale of an asset.
- Payment from several guarantors.
- Another commercially acceptable proposal.
However, a creditor does not have to accept a reduced payment or extended repayment period.
The likelihood of an agreement may depend on:
- The amount owed.
- The strength of the guarantee.
- Whether security is held.
- The director’s income and assets.
- The amount the creditor expects to recover from the company.
- Whether there are several guarantors.
- How early the director engages with the creditor.
Directors should be realistic and transparent about what they can afford. Agreeing to payments that cannot be maintained may only delay further action.
Does having a personal guarantee prevent a Creditors’ Voluntary Liquidation?
No.
A company can still enter a Creditors’ Voluntary Liquidation, commonly known as a CVL, even where one or more company debts have been personally guaranteed.
The personal guarantee and the company’s insolvency are connected, but they are not the same issue.
A CVL may still be appropriate where:
- The company cannot pay HMRC.
- Suppliers remain unpaid.
- The business has stopped trading.
- Employees need to be dealt with.
- Company assets need to be sold.
- There is no realistic prospect of recovery.
- Creditor pressure is increasing.
The personal guarantee should be considered alongside the liquidation rather than treated as a reason to avoid dealing with the company’s insolvency.
Delaying liquidation solely because of a guarantee can sometimes make matters worse if further debt, interest or losses continue to build.
Are Bounce Back Loans personally guaranteed?
Personal guarantees were not permitted under the Bounce Back Loan Scheme.
The scheme provided the lender with a government-backed guarantee, but this was a guarantee to the lender. It was not a personal guarantee given by the company director.
Therefore, an ordinary outstanding Bounce Back Loan does not normally become the director’s personal debt simply because the company enters liquidation.
However, separate issues can arise where:
- False information was included in the application.
- Turnover was knowingly overstated.
- The money was used personally.
- The company was not eligible.
- Funds were transferred without a legitimate business purpose.
- The loan increased an overdrawn director’s loan account.
The Insolvency Service can investigate misuse of Bounce Back Loans, and serious cases can result in compensation claims, director disqualification or other action.
This should therefore be considered separately from a conventional personal guarantee.
What should I do if my company has debts that I have personally guaranteed?
The following steps can help establish the true position.
1. Obtain every relevant document
Request copies of the signed guarantee, facility agreement, lease, finance terms and any later amendments.
2. Prepare a list of all possible guarantees
Include guarantees given to banks, landlords, finance companies and suppliers.
3. Check the current balances
Do not rely on the original amount borrowed. Obtain an up-to-date figure showing capital, interest, charges and costs.
4. Identify any security
Establish whether the guarantee is secured against property or another personal asset.
5. Do not make selective company payments
Avoid using company funds to repay a guaranteed creditor merely to reduce your own personal exposure.
6. Review the company’s overall position
A personal guarantee should not be considered in isolation. HMRC debt, employees, leases, company assets, director loan accounts and other creditor claims all need to be reviewed.
7. Obtain advice before enforcement escalates
Early advice usually provides more opportunity to assess the company, understand the guarantee and consider a realistic way forward.
Frequently asked questions
Does resigning as a director cancel my personal guarantee?
No. Resigning as a director does not normally release you from a guarantee you previously signed. A formal release from the creditor would usually be required.
Can a lender pursue me before the company is liquidated?
Potentially, yes. The lender may be able to rely on the guarantee once a contractual default has occurred. Formal liquidation is not necessarily required.
Am I personally responsible for every company debt?
No. Directors are not normally responsible for all company debts. A personal guarantee generally applies only to the particular debts or obligations it covers. There are separate circumstances involving misconduct or statutory liability where personal exposure can also arise.
What happens where two directors signed the guarantee?
The answer depends on the wording. Under a joint and several guarantee, the creditor may be able to pursue either guarantor for the full guaranteed amount.
Can a personal guarantee be included in a lease?
Yes. Commercial landlords may require directors or shareholders to guarantee rent and other obligations owed by the company.
Will liquidation protect me from the personal guarantee?
Liquidation deals with the company’s financial affairs. It does not normally prevent a creditor from relying on a separate personal guarantee.
Speak to DCA Business Recovery
A personal guarantee can be worrying, but it does not automatically mean that you will lose your home or be required to repay every company debt personally.
The outcome depends on the wording of the guarantee, the amount owed, any security held, the company’s assets and your own financial position.
DCA Business Recovery is a family-run insolvency practice based in Southend-on-Sea, helping company directors across Essex, London and the wider UK.
We can review the company’s financial position, explain whether liquidation or another option should be considered and help you understand how personally guaranteed debts fit into the overall situation.
For a free and confidential initial discussion, call DCA Business Recovery on 01702 344558 or book an advice call through our website.
Written by Luke Cockerton. Reviewed by Deborah Cockerton, Licensed Insolvency Practitioner. Last reviewed: July 2026.
This article provides general information and should not be treated as legal advice about the validity or enforceability of a particular personal guarantee. Independent legal advice may be required.
