How To Protect Personal Assets Before Business Failure

Article Summary

A personal guarantee can expose far more than your business assets. If you have personally guaranteed a company loan, commercial lease, equipment finance agreement or trade credit facility, a creditor may be entitled to pursue your personal assets if the business defaults.

Depending on the guarantee and any supporting security documents, your family home, investment properties, bank accounts, shares and other assets may all be at risk. Even assets held jointly or through more complex ownership structures are not automatically protected.

Many directors incorrectly assume that operating through a company prevents personal liability. While a company generally remains responsible for its own debts, signing a personal guarantee creates a separate contractual obligation that may allow a creditor to recover directly from the guarantor.