The Guarantee File You Did Not Know You Had: A Director’s Audit Before Lenders Call

The guarantee that sits outside the balance sheet

Limited liability is one of the central promises of the UK company structure. A personal guarantee quietly reverses that promise for a named individual. It is rarely signed as a standalone event. More often it appears as a schedule to a bank facility, a clause in a commercial lease, or a condition of supplier credit. By the time the director is asked to sign, the commercial conversation is already advanced and the legal language is already dense.

The result is a familiar governance gap. The company knows its overdraft, its lease commitments and its trade creditors. The director may not know which of those obligations have been personally guaranteed, for how much, for how long, or alongside whom. That gap matters most when a lender, landlord or supplier is under pressure and begins to review its security position. The audit below is designed to close it before anyone else does.

Start with the paperwork you already hold

Set aside one afternoon. The objective is not to produce a legal opinion. It is to build a complete enough picture that the board can ask better questions and take advice where needed. Begin with the documents most likely to contain guarantees: facility letters and security schedules, commercial leases and side letters, supplier account terms, invoice finance agreements, board minutes, and emails from finance directors or former advisers.

Search email and shared drives for terms such as guarantee, indemnity, joint and several, continuing security, and counter-indemnity. Ask the finance function whether any guarantee was given orally or by conduct, although a written record should always be preferred. Personal guarantees are not normally filed at Companies House, so the company’s statutory record will not solve the problem. The paper trail is usually internal, incomplete and spread across several folders.

Six questions that define the exposure

For each guarantee identified, answer six questions in writing.

1. Who is the beneficiary? Is it a bank, a landlord, a supplier, an invoice financier or another counterparty? Identify the legal entity, not just the trading name.
2. What obligation is guaranteed? Does it cover all sums owed under the facility, only principal, or a specific contract? Does it extend to interest, fees, costs and enforcement expenses?
3. Is there a cap? If so, is the cap fixed in pounds, floating with the facility, or limited by reference to a formula? Check the currency and whether the cap includes costs.
4. Is liability joint and several? If other directors or connected parties have signed, the beneficiary may pursue any one guarantor for the whole amount. Contribution rights between guarantors are a separate matter and should not be assumed.
5. Is the guarantee continuing or time-limited? Can it be revoked, and if so, does revocation affect existing exposure? A continuing guarantee may survive changes to the facility.
6. What triggers a demand? Default, insolvency, a change of control, a failure to renew, or a breach of covenant elsewhere in the relationship?

A guarantee is not always just a guarantee

Directors often use the word guarantee loosely. A guarantee creates a secondary obligation to pay another party’s debt. An indemnity creates a primary obligation and can be broader. A counter-indemnity given to a bank that issues a bond is another variation again. The distinction affects how and when a claim can be made. It is not a distinction to resolve from memory during a renewal meeting.

Build a one-page guarantee register

The audit should end with a register, not a pile of PDFs. A single page with columns for counterparty, date signed, related obligation, cap, joint guarantors, security given, review date and document owner will do. Attach the underlying documents and store the register with the board papers. The register should be reviewed at least annually and whenever a facility is renewed, a lease is assigned or a new credit line is opened.

Put the board on notice

For a company with more than one director, record the audit in the board minutes. Note which guarantees are known, which documents are missing, and what advice is being taken. For a sole director, write a short memorandum to file and date it. The purpose is not bureaucracy. It is to show that the director has turned their mind to the exposure and has not left the company’s governance to chance.

Preparing a negotiating position in 2026

Once the register exists, the board can decide what it wants before the next renewal. Common positions include a fixed cap, a time limit, release on satisfactory performance, a reduction as a facility amortises, or a guarantee fee payable to the director. Each position should be supported by evidence: the company’s covenant history, the value of the relationship, the availability of alternative security, and the director’s own tolerance for risk.

No new guarantee should be signed without being added to the register first. That simple rule prevents the file from becoming invisible again. Where the exposure is material, take legal advice before signing or before agreeing a variation. The audit is a governance exercise, not a substitute for specialist advice.

The discipline after the audit

A personal guarantee is not a one-off administrative task. It is a live contract that can sit quietly for years and then become the most important document in the room. Diary the annual review. Add a guarantee check to every facility renewal, lease event and supplier credit application. Keep the register with the board pack. The director who knows what they have signed is in a far stronger position than the one who discovers it when a lender calls.