What is a Director’s Guarantee?
A Director’s Guarantee is a secondary agreement where an individual (being a Director of the Company) assumes responsibility for the debts of the company in the event of payment default.
It is common for banks or creditors call on Directors to give their personal guarantee in respect of debts of the company. Directors’ Guarantees are more often called for when the company is small in size or has limited assets of its own to support the loan.
How can a Director’s Guarantee assist your Company?
Where a Director personally guarantees the debts of the company, and if the company fails to pay its debts, the Guarantor (being the Director) can be sued. This is effective where the company goes into liquidation or has administrators appointed, and affords your company a further opportunity to recover any debt.