A personal guarantee (often called a PG) is where an individual enters a contract to guarantee another party’s liabilities under a separate contract. PG agreements are often used by suppliers to limited companies, or on property rental and loan agreements.
The objective of the personal guarantee is to provide an additional layer of security to the supplier or lender. The need for PGs has increased in recent years, due in part to high company insolvency numbers (roughly 1 in 300 companies enters liquidation https://www.gov.uk/government/statistics/company-insolvency-statistics-october-to-december-2021/commentary-company-insolvency-statistics-october-to-december-2021#:~:text=1.1%20Annual%202021,41.9%20per%2010%2C000%20in%202019 and other companies, who cannot afford liquidation, simply allow their company to be struck off Companies House). This doesn’t include any non-paying individuals under loan and rental agreements which also make up a large proportion of non-payers.
Whilst the objectives of the PG are usually the same, the construction of the PG can differ. Some agreements will allow a creditor to begin action against a PG without first commencing action against the original contract holder. Some PG agreements will allow the creditor to claim costs and compensation from the PG in addition to the original sum owed. You will need to review the terms of your PG to see exactly what is covered.
Whether you’re owed money under a PG or you want to add terms to your contract so that you can pursue PGs, speak to the team at Debt-Claims Solicitors today.