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What is a Directors Guarantee?

David Allen

When offering any form of finance, lease, or loan with a limited company it is important that you ensure you incorporate a Directors Guarantee into the terms and conditions of your transaction.

A Directors Guarantee is a personal guarantee meaning that if the company was unable to pay the debt, the directors would become liable to meet the obligations of this debt instead.

A limited company is a separate legal entity from that of the directors, this means that without a Directors Guarantee clause in your terms and conditions (or a separate Directors Guarantee agreement in writing), the debt would not be honoured if the company was to become bankrupt (insolvent).  With a Directors Guarantee in place you are able to hold the director of the company personally responsible for any debts.

If the limited company has more than one director, the terms of the Directors Guarantee may differ with either one of the directors being responsible, or all of the directors being ‘joint and severally’ responsible for the debt together.

At David Allen Recovery Solutions we offer a FREE Credit Control Pack which contains examples of both a Directors Guarantee clause to add into your terms and conditions, and a Directors Guarantee agreement template for you to utilise in your business.  To receive your own copy of our pack please contact the Recovery Solutions team on 01228 713070.

Posted: July 7th, 2015

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