Personal Guarantee Advice from an Independent Solicitor

What is a personal guarantee, and when do directors meet one?

Running your business through a limited company normally keeps its debts at arm's length: the company is a separate legal person, it borrows in its own name, and if it fails its creditors' claims stop at the company. A personal guarantee is designed to reach past that protection. By signing one you promise the lender, as an individual, that if the company does not pay what it owes, you will, from your own income, savings and assets. The guarantee is a contract between you and the lender that sits entirely outside the company's limited liability, and it survives even if the company itself is wound up.

Most directors meet one the first time their company borrows. Banks, asset and invoice finance providers, trade suppliers and commercial mortgage lenders routinely make a director's guarantee a condition of the facility. Landlords do the same through commercial lease personal guarantees when a company takes premises, and almost every limited-company mortgage lender requires buy-to-let personal guarantees from SPV directors. The pattern is always the same: the company gets the money, and you personally stand behind it.

Joint and several liability, explained properly

If two or more of you are guaranteeing the same facility, your guarantee will almost certainly be joint and several, and this is the clause directors most often misread. It does not mean the debt is split between you. It means each of you is separately liable for all of it. A lender owed £200,000 by a company with four guarantors does not have to claim £50,000 from each; it can demand the full £200,000 from whichever of you is easiest to recover from, usually the guarantor with a house, savings or a steady income.

If you end up paying more than your fair share, you can pursue your co-guarantors for a contribution, but that is your claim to bring, at your own cost, and it is worth little if your fellow directors have nothing to recover. In the appointment, your solicitor will confirm whether your guarantee is joint and several and what that means for your realistic worst case.

Capped or unlimited? Interest and costs clauses matter too

The most important question about any guarantee is how much you could ultimately owe under it. A capped guarantee limits your liability to a stated figure (say £75,000), however large the company's debt grows. An unlimited guarantee covers whatever the company owes under the facility, and the widest versions, usually labelled "all monies", stretch to everything the company owes the lender now or in the future, including borrowing you have not yet agreed to.

Even a cap can be less protective than it looks. Many documents cap the principal sum but add interest and costs on top: default interest that keeps running from the date of demand, plus the lender's legal and recovery costs. A £75,000 cap can quietly become a six-figure liability once a dispute has dragged on. Your solicitor will read the actual clause and tell you what your true ceiling is, and whether it is worth asking the lender for a cap before you sign. To get ahead of the appointment, our director's guide to personal guarantees covers the questions worth asking in more depth.

What enforcement actually looks like

It helps to replace vague dread with an accurate picture. If the company defaults, most guarantees let the lender make a written demand on you straight away: "on demand" wording means it does not have to sue the company, or wait for an insolvency process to finish, before turning to you. What usually follows is correspondence rather than a court summons: lenders generally prefer a negotiated settlement or a payment plan to litigation, and many guarantee claims are resolved that way.

If no agreement is reached, the lender can issue a court claim for the debt like any other creditor. A judgment can then be enforced against your assets: a charging order can be registered against your home, and deductions from earnings, bailiff action or, for larger debts, bankruptcy proceedings are all available routes. None of it is automatic or instant, and every stage can be negotiated, but this is the machinery you accept when you sign, and you should see it clearly beforehand.

Guarantees within couples and families: the Etridge rules

Special care applies when the person signing is not the businessperson borrowing, but their husband, wife, partner or relative. In *Royal Bank of Scotland v Etridge (No 2)*, the House of Lords set out what a lender must do when someone stands surety for another person's debts in a non-commercial relationship. The classic example is one spouse guaranteeing, or charging the family home for, the other's business borrowing. In that situation the lender is "put on inquiry": the law recognises a risk that the signature was obtained by undue influence or a misleading picture of the finances.

The Etridge answer is independent legal advice. The lender must ensure the surety is advised by a solicitor, separately from the borrower, and receives written confirmation that this happened. That confirmation is what protects the lender: without it, a guarantee or charge given in these circumstances is vulnerable to being set aside. So if a bank is insisting your spouse or partner sees a solicitor before your company's facility completes, it is not bureaucracy: it is the lender following the courts' own checklist, and our appointment provides precisely the advice it calls for.

Why lenders insist on independent advice, and what the certificate does

Here is the legal position, stated plainly. Independent legal advice is typically a lender requirement, not a rule of law. No statute says a personal guarantee is invalid unless a solicitor advised you first, and a director's guarantee of their own company's borrowing is normally enforceable even where no advice was taken. What the lender is buying with its ILA requirement is certainty: a signed confirmation from a solicitor makes it very hard for a guarantor to argue later that they did not understand the document or were pressured into signing. In the Etridge situations above, it is the step the courts expect before the lender can safely rely on the guarantee.

The independent legal advice certificate is the document that records all of this. Signed by the solicitor who advised you, it confirms that the nature, effect and risks of the guarantee were explained to you in a private appointment and that you are signing freely. Our certificates are prepared to satisfy standard lender requirements, and if your lender or its solicitors have issued their own form of certificate, we complete that instead at no extra charge. Just email it to info@ilahub.com when you book.

What your solicitor covers in the 30-minute appointment

The appointment is not a lecture about guarantees in general: the solicitor reads your document and advises on what it actually says. In 30 minutes you will cover:

• The nature and effect of the guarantee: what signing legally binds you to, and how it reaches past the company's limited liability to you personally.
• Your specific document: capped or unlimited, any "all monies" wording, what the interest and costs clauses add, whether liability is joint and several, and how you could eventually be released.
• The realistic risks: what a demand would mean for your income, savings and home, so you can weigh the commitment against the value of the funding.
• Anything worth raising with the lender: a cap, a time limit or clearer release terms are sometimes negotiable, and it is far better to ask before signing.
• Your questions: answered by a solicitor whose only client in the matter is you.

The certificate is signed only once the solicitor is satisfied that you understand the guarantee and are entering into it freely, which is the whole point of taking the advice first.

Why the company's own solicitor cannot advise you

Directors often ask why the solicitor already handling the loan cannot simply sign the certificate. The answer is a conflict of interest. That firm acts for the company (and sometimes for the lender too), and its job is to get the facility completed for its client. Your interests as guarantor pull the other way: you are the person the lender will pursue if things go wrong, and honest advice to you might be "ask for a cap" or "do not sign this as drafted". A solicitor cannot properly act on both sides of that line, and the SRA's rules on conflicts of interest prevent it. That is why lenders reject certificates signed by the transaction's own solicitors: the advice must come from a solicitor whose only involvement in the deal is advising you.

How to get your certificate: the process

The whole service is remote. See how it works for the full detail. Four steps:

1. Book online: choose your slot from the live diary when you book. Appointments run Monday to Friday, 9am to 7pm, UK-wide.
2. Verify your ID from your phone: a secure online identity check before the call, with nothing to print, post or notarise. Upload the guarantee and any lender certificate form at the same time.
3. Meet your solicitor by video: a private 30-minute call in which the solicitor explains your guarantee, its risks and anything you want to ask, with no one else from the transaction present.
4. Receive your certificate: signed and emailed the same working day as the appointment, ready to send on to the lender or its solicitors.

What personal guarantee legal advice costs

The fee is fixed, published and per person: no hourly rates and no "from" prices. Every tier includes the 30-minute video appointment with a solicitor, the online ID check, your certificate emailed the same working day as the appointment, and completion of your lender's own certificate form where one exists:

• Standard: £150 per person. Appointment two or more days ahead. The right choice when completion is scheduled but not breathing down your neck.
• Fast Track: £250 per person. Appointment the next day, for funding timetables that have tightened.
• Priority Same-Day: £350 per person. An appointment today, when the lender is waiting on nothing but your certificate.

Several directors guaranteeing the same facility can book back-to-back appointments; each receives their own advice and certificate. Full details of every fee are on our pricing page.