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ARTICLE · 03 MARCH 2021

Minimising exposure under personal guarantees

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Suggestions for directors on ways they can manage their exposure under personal guarantees. Links to related articles.

AustraliaInsolvency/Bankruptcy/Re-Structuring
Matthew Jess
Matthew Jess
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DON'T TAKE IT PERSONALLY!

When the COVID-19 pandemic first landed on Australia's shores some 12 months ago, the insolvency industry braced for a wave of insolvencies following massive interruptions to business (causing a COVID-induced recession). The wave of insolvencies did not ultimately arrive, stymied by unprecedented government stimulus and support.

A key pillar of government intervention reaches the end of its useful life at the end of March (JobKeeper), and with other stimulus and support winding back, we expect to see increasing pressure on cash flow and in turn, an increase in the rate of insolvencies (which are effectively at historic lows).

An increase in the rate of business failures will expose risks faced by business owners to personal liability for their failed business's debts, including for personal guarantees given. The creditors that will almost always have a personal guarantee include a financing bank, a landlord, and major suppliers. It is

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