Personal Guarantees in Business and Leasing: What Are You Signing?

A personal guarantee is a promise to answer for another party’s obligations. In a lease, loan or supply arrangement, it can expose a director, shareholder or relative’s personal assets if the company or principal debtor defaults. The scope, duration, limits, indemnities, security and release provisions should be reviewed before signing.

Key points

• Limited liability of a company does not protect a person from a guarantee they sign personally.
• Some guarantees cover future variations, renewals, costs and indemnified loss.
• Leaving the company may not release a guarantor.
• Multiple guarantors may each face liability for the whole amount, depending on wording.
• Independent advice should occur before commitment, not after default.

What should be reviewed?

Identify the guaranteed obligations, maximum amount, interest, enforcement costs, duration and events allowing demand. Check whether the document contains an indemnity, charge over property, power of attorney or consent to a caveat or other security.

Read the guarantee with the underlying lease, loan or contract. A guarantee can be wider than the headline obligation and may continue through extensions or variations.

Can liability be negotiated?

Depending on bargaining position, a guarantor may seek a dollar cap, expiry date, limited period, notice before enforcement, exclusion of variations without consent or release after a replacement guarantee. Agreement is commercial and cannot be assumed.

Hypothetical example

A director sells the company but the landlord never signs a release. Years later the company defaults. The former director may still face a claim if the original guarantee continued. Exit documents should address releases expressly.

Information to bring

• Guarantee and underlying agreement
• All variations and disclosure documents
• Identity of debtor and guarantors
• Proposed security
• Financial and ownership structure
• Intended duration and exit plan

Obtain advice before signing

Book a guarantee consultation. Legal Care Australia will confirm whether it can advise and whether separate representation is required.

Sources to verify at legal review

• Underlying contract and applicable legislation
• Current court authorities relevant to the guarantee wording

First drafted: 21 July 2026. General information only.