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Personal Guarantee

Our Personal Guarantee template:

  • Use for personal guarantee or parent company guarantee
  • Money-back satisfaction guaranteed by Legalo
  • Drafted by a UK Banking Solicitor for reliability
  • Easy to edit template with guidance notes
Money Back Guarantee

How Does It Work?

  • 1. Download
  • 2. Edit
  • 3. Print
  • 4. Sign

Our Personal Guarantee template is for use when someone is to guarantee the repayment of a loan or other obligation. It also works as a parent company guarantee by a parent or holding company of one of its subsidiary’s debts.

This personal guarantee incorporates various options, so it is appropriate whether or not:

1. there is a personal loan or a commercial one;

2. the lender is a company, individual or partnership;

3. the borrower is a company, individual or partnership;

4. the guarantor is a company (e.g. for use as a parent company guarantee), individual or partnership; or

5. the guarantee is for the full amount of the loan or only up to an agreed capped amount.

Best practice on the use of a personal guarantee

As regards any guarantor, it is always advisable to ensure the guarantor obtains independent legal advice from a solicitor before signing the guarantee. Ideally, the solicitor advising the guarantor would sign off a confirmation of legal advice and sign the guarantee as witness. It is your choice as lender if you insist on this, but it has become best practice for banks and other commercial lenders recently.

If you need a template for the independent legal advice certificate, then click here to find our template.

The Statue of Frauds 1677 and using a personal guarantee

It is a fundamental requirement of English law that any guarantee is in writing, otherwise it cannot be enforced in the courts and will be invalid. A verbal guarantee is worthless.

Read more about personal guarantees at one of our favourite websites: Wikipedia.

Clauses in this Personal Guarantee template

Below we have printed part of the guide that accompanies the template, so you can get a better idea of what it covers.

Date – Insert just the year at this stage. Handwrite the rest of the date in the agreement once all the parties have signed it.

Party clauses – You will need to insert the names and addresses of party 1 (the lender) and party 2 (the guarantor). If they are companies, also insert the country where they are incorporated and their company number (see the format we have assumed you need for the Lender for a company). If either or both are individuals, then see the format we have assumed you need for the Guarantor (name and address). For the Guarantor, you can also add an address where legal proceedings should be served if you like (for example at their solicitor’s address). This is optional, so delete it if you are not using it.

Restriction on the amount guaranteed

The lender can cap the amount guaranteed. If the personal guarantee is not for a sum that is less than the total amount lent under the loan agreement or the like, then delete this section.

Numbered clauses in our Personal Guarantee

1. Interpretation

This clause defines the main terms used in the agreement.

  • Agreement this is a reference to the contract under which the borrower is liable to the lender. Usually this is a loan agreement. If it is called something else such as a “facility letter”, then amend the definition.
  • Borrower fill in the relevant details. As with the party clauses, if the borrower is an individual, then use the format of name and address.

2. Guarantee

Clause 2.1 is the main guarantee provision. The guarantee covers the amount outstanding on the loan, interest on that loan chargeable under the loan agreement and then any enforcement expenses incurred by the Lender, as is usual. If there is a cap on the guarantor’s liability, then this clause is subject to that cap – see clause 4.1.

3. Indemnity

This provides further legal comfort to the Lender.

4. Restriction on the Guarantor’s liability

Delete this whole clause if there is no agreed cap on the guarantor’s liability. Normally the cap only applies to the amount outstanding on the loan, so interest and expenses are still in addition (see clause 2.1). If there is a cap, state it where provided.

5. Certificate

This clause is self-explanatory. Complete the wording in square brackets.

6. Continuing security

This provides further legal comfort to the Lender.

7. Subordination

This provides further legal comfort to the Lender. Its effect is that the Guarantor’s claims against the Borrower (if any) will rank behind the Lender and, for example, will not take payment from the Borrower, etc, which might weaken the Borrower’s ability to repay the loan to the Lender.

8. Arrangements with the Borrower and others

This provides further legal comfort to the Lender.

9. More than one Borrower including partnerships

This provides further legal comfort to the Lender in case the Borrower comprises more than one person or is a partnership.

10. More than one Guarantor including partnerships

This provides further legal comfort to the Lender in case the Guarantor comprises more than one person or is a partnership.

11. Preservation of the Lender’s claims and rights

This provides further legal comfort to the Lender. In part, it expands on clause 7.

12. Grossing-up

This clause is self-explanatory.

13. The Lender’s powers and transfers

This provides further legal comfort to the Lender.

There are some other boilerplate or standard clauses at the end of the template, and a guide as to how the document should be signed, but they are not sufficiently interesting to warrant comment here.