What is Personal Guarantee (PG)?
A legally binding agreement where a company director agrees to be personally liable for a business debt if the company defaults.
The Details
A Personal Guarantee pierces the "corporate veil" of limited liability. If a limited company cannot meet its loan repayments and is liquidated, the lender can pursue the director's personal assets (including their home, savings, and investments) to recover the debt. Some PGs are "supported" (requiring a charge over a specific personal asset) while others are "unsupported." Directors can often purchase Personal Guarantee Insurance to mitigate this risk.
Commercial Relevance
Most unsecured business loans and many asset finance agreements require a Director's Personal Guarantee. Understanding the scope of a PG is crucial before signing any commercial credit agreement.