Personal Guarantee
A promise by a director or owner to personally pay a company's debt if the company itself fails to do so.
What it is
A personal guarantee is given by an individual, usually a director, to back a company's account. If the company does not pay, the guarantor becomes personally liable for the debt. It is a common safeguard when supplying small or newly formed companies that have a limited trading history.
Making it enforceable
For a guarantee to hold up, it must be in writing, signed by the guarantor, and clearly identify the debt and the parties. Capture it within the credit application. Across QLD, VIC, NSW and the ACT, courts expect the wording to be unambiguous, so do not rely on a vague or buried clause.
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