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Directors Insolvency ? How to deal with a Personal Guarantee

Director’s Insolvency can be a problem especially after a company enters an insolvency procedure, where the directors may have personally guaranteed the borrowing of the company in question.

The problem was envisaged back in 1986, when the Insolvency Act created the Individual Voluntary Arrangement, which was intended to help stave off bankruptcy, but to allow repayment of part of the debt to the creditor. It allowed the liabilities to be spread over 60 monthly payments.

Many company directors, use the limited company shield as a valid device for protecting their own personal liability. However, it has become a common occurrence for lenders to require a director to offer up a personal guarantee or even a second charge on personal property to secure the borrowings of the company. This is all well and good when repayments are being made, and of course everybody expects their business to be an unqualified success, and so the PG never to be called upon.


Most PG’s are limited to a value so at least the director will know the extent of his liability. When a business does become insolvent, any assets securing the debt, are utilised to pay of the loan. Any amount not so discharged, then fall upon the directors under their PG to clear.

Help lines exist to assist directors who are suffering as a result of entering into a Personal Guarantee, to protect themselves from bankruptcy. It may even be possible to negotiate with a lender to carry any debt across into a new venture, thereby obviating a need to discharge the PG immediately.

It will be important for a director to avoid bankruptcy if the intention is to carry on business, as a bankrupt will not be able to hold the office of director if bankrupt.

If you have a PG and require advice, please seek the advice of an insolvency professional.

Information provided by Steve Thatcher of Help With Debt (UK) Limited and total debt solutions company.
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If you have any debt problem whatsover either personal or corporate make Steve your first call all advice is free. Finally if in the UK and you need a friend to speak to call 01162171406



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