Joint & Several Personal Guarantees

A joint and several personal guarantee is signed by 2 or more directors and makes all parties equally liable for the entirety of the debt. These types of personal guarantees can be the hardest form of security to deal with due to their more complicated nature, acrimonious relationships and the fact that guarantors often misunderstand their impacts.

In the end, they carry the same personal consequences for directors but, with another layer of difficulty. This is why it is so important to get advice from experienced experts as soon as possible.

“Is my Guarantee Joint and Several?”

Generally, if you have signed a personal guarantee with another person, or multiple parties, it will be joint and several. Whether this is a co-director, your partner or a family member, the facts are still the same. Lenders do this as it allows them to essentially double up on their security i.e. two directors to make pay rather than one.

Due to the wording of loan agreements, it can be difficult to tell if a personal guarantee is joint and several. In fact, it can sometimes be difficult to identify which wording actually refers to the personal guarantee. But a guarantee is more than likely joint and several if signed by two or more parties.

What Happens If You Can’t Pay a Joint and Several PG

After a few missed payments on a business loan, a creditor will ‘trigger’ a personal guarantee. This means that you will become personally liable for the outstanding debt. In the case of a joint and several liability, you and anyone else who has signed will be liable. This is where the confusion often lies. All guarantors are each liable for the full amount.

For example if you borrowed £100,000, you and everyone else who signed can be pursued for £100,000. This does not mean you will each pay £100,000 but, if one of your co-guarantors refuses to pay, you could end up paying for everything.

The personal liability means that you will face the same consequences as any other debts. The procedure for recovering this debt is usually quite predictable. These recovery methods can include:

• Judgements
• Orders Charging Land
• Repossession Orders
• Statutory Demands
• Bankruptcy

Ultimately, the goal of them is to either make you pay the outstanding debt or, repossess your assets to recover the money this way. These assets include cars, investments and other business but, the asset that creditors are most likely to target is your main residence/family home. You can read more about the full consequences of personal guarantees here.

“My Co-director is Refusing to Pay Their Share”

Unfortunately, this is an extremely common scenario, especially when a business has failed. It is often the case that one guarantor either refuses to pay or ignores creditors. This leaves the other guarantors with a serious financial burden.

Maintaining a working relationship with all co-guarantors makes the process more simple but, but if relationships have broken down, a resolution is still possible. As mentioned above, under a joint and several guarantee, the creditor will still pursue each individual director for the full amount.