Expert Advice for Directors Guarantee
- Specialist advice for directors' guarantee
- Experienced, independent solicitors
- Fully digital consultations for easy access and complete privacy
- Fast turnaround, with availability of same-day appointments for urgent ILA
- Fixed, transparent pricing plans
- Lender-compliant ILA certificate
What is a Director’s Guarantee?
The landmark case of Salomon v Salomon [1897] established the precedent that limited companies are treated as independent entities. Under this principle, directors were not personally liable for the company's debts. So how exactly does a director’s guarantee work?
When a director signs a personal guarantee, they’re agreeing to a secondary obligation that requires him to fulfil the company or business’s obligations. This effectively overrides the earlier precedent and makes the director personally liable, allowing creditors to call in the guarantee in the event of a loan default.
In simple terms, a director's guarantee is a legally binding contract between a company’s director and a creditor. It's fairly common for companies or businesses with limited assets to secure high-value funds this way, while it provides lenders with additional security.
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How Does a Director's Guarantee Work?
A director’s guarantee can be signed by multiple directors or a sole director, depending on the company’s structure or lender requirements. In this case, the guarantee will be considered ‘joint and several’, meaning guarantors will remain dormant until the company misses a payment, enters insolvency, or breaches lease terms.
Once any of these factors is triggered, a creditor may pursue one or more of the guarantors for the full amount owed under the guarantee. Any guarantor who is required to pay may then have rights of contribution against other guarantors, depending on the terms of the agreement.
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When a director signs a personal guarantee, they may be accepting personal liability for the company’s obligations under the agreement. This means a creditor may seek to enforce the guarantee directly against the guarantor if the company fails to meet its obligations, subject to the terms of the guarantee.
Our expert solicitors for director guarantees provide clear explanations and sound legal advice to understand the risks and liabilities involved in on-demand guarantees.
Risks to Directors When Signing a Personal Guarantee
Here are some of the risks you may encounter when signing a director's guarantee.
Unlimited personal liability: Lenders can pursue you for 100% of the loan balance amount, including any interest accrued and the lender’s enforcement fees, unless the amount is capped in the agreement itself.
Enforcement against personal assets: Depending on the terms of the guarantee and any associated security, a lender may have the right to take enforcement action against a guarantor’s personal assets if the company defaults. The nature and extent of these rights will depend on the documents signed and the type of security granted.
Disqualification as a director: Financial instability leading to bankruptcy can be grounds for a director's disqualification in UK companies. Personal guarantees remain active unless a lender gives you a formal deed of release.
What you can expect from iLA
When you come to iLA for legal advice on a personal guarantee, you get more than just a quick sign-off. We’ll make sure you’re fully informed about:
Your liability:
Understand exactly what you’re committing to and the specific circumstances under which your personal assets could be at risk.
The fine print:
We’ll break down the guarantee terms, so you’re aware of all the potential scenarios.
Your options:
We’ll discuss whether there are alternative arrangements you could consider or ways to mitigate your risk.
Protecting yourself:
We’ll advise on any steps you can take to safeguard your personal assets before signing.
You really just want quick and easy ILA. But it’s also essential to make the best decision for your situation.
Why Independent Legal Advice (ILA) Is Essential for a Director’s Guarantee
RBS v Etridge [2001] established the requirement for independent legal advice for all guarantors. Here, the ILA for directors' guarantee ensures you’re signing the document voluntarily and freely and that you're fully aware of the potential risks and liabilities involved.
This includes understanding and receiving full clarity regarding the ‘all monies’ clause that would make you liable for the company’s current and future debts. Legal advice for directors’ guarantees also involves explaining the fine print, which is often misunderstood or entirely missed without professional ILA.
An ILA certificate confirms to your lender or creditor that you’re under no pressure from other co-directors and are signing the directors' guarantee with full knowledge, understanding and consent. The certificate also speeds up the release of important business funds or finalises a commercial lease. Therefore, it's important to receive expert legal advice for director guarantees.
How it works
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We make sure you understand the legal effect of the guarantee and the obligations it creates.
We’ll explain how a director's guarantee could affect your personal property and finances if the company defaults on a loan, and we'll provide sound legal advice.
Repayment terms
A clear explanation of the obligations created by the guarantee and the consequences set out in the agreement if those obligations are not met.
The risks of default
We’ll explain what’s at stake if things don’t go as planned, including the potential loss of your property.
Your exit strategy
A clear exit plan is crucial for directors' guarantees. We’ll explain how and when a director’s guarantee may come to an end, including any provisions relating to release, variation or continuing liability.
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Book your appointment
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Get ready for your appointment
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Get your legal advice
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Sign and complete
Transparent, Fixed Fee Legal Advice
We believe in clear, fixed pricing so that you don’t have to worry about any hidden fees or charges. Our pricing is based on urgency so that you have the flexibility to choose a pricing plan based on your requirements.
Our fee plans are structured as Diamond, Gold, Silver and Bronze. You can learn more here.
Why Choose
?
Before you sign, you must fully understand what you’re agreeing to. Here’s why legal advice for directors guarantee is highly recommended.
Specialists in high-speed transactions:
We focus exclusively on ILA, and our expertise helps you navigate the risks of director guarantees.
Fast, flexible appointments:
Need advice today? We’re available seven days a week, so you can get the guidance you need on your schedule.
Seamless online service:
Everything is handled digitally—from consultation to document signing—so you can keep your project moving without delays.
Clear, fixed pricing:
Our fees are transparent and fixed, so you know exactly what you’re paying from the outset.
Let’s make sure you understand exactly what you’re agreeing to before you move forward. We’re here to provide clear, expert-led ILA on directors' guarantees and more to protect your interests.
As one of the UK’s leading ILA firms specialising in property and finance ILA, we’re committed to ensuring you have a high-quality service from beginning to end. We provide independent legal advice for directors, including ILA for personal guarantees, third-party legal charges, deeds of subordination, loan agreements, occupiers' consent and more.
FAQs
Yes. Lenders require directors to provide an ILA certificate confirming they’ve received independent legal advice for directors' guarantees from an SRA-regulated solicitor. This protects lenders from later claims of undue influence or misunderstanding of terms and conditions in the document.
Book Your Consultation or Call Today
We highly recommend getting legal advice for director guarantees to understand your personal liability better, its impact on your assets, and to clarify any hidden risks. At iLA, we provide strategic guidance and sound legal counsel to guide you through the process efficiently.
We’re regulated by the Solicitors Regulation Authority (SRA), have a 5-star rating on Trustpilot and were awarded the Best Specialist Finance Partner in 2024 by the Bridging & Commercial Awards. Our co-founder, Anastasia Ttofis, has been consistently featured in leading legal publications and continues to make a difference with ILA.
We’re here to assist you 7 days a week from 8 am to 8 pm. Call us on 020 4571 9207 today. Alternatively, if you have any questions about getting independent legal advice for directors' guarantees, email us at ask@ila.co.uk
