How does liquidation affect personal guarantees?

When a company enters liquidation, personal guarantees signed by directors become enforceable. Many lenders, landlords, and suppliers require directors to personally guarantee company debts, particularly in small and medium-sized businesses. Once the company is liquidated, creditors holding these guarantees can pursue directors personally for repayment, regardless of the insolvency process. This means directors may face significant financial exposure, including the risk of bankruptcy, if they cannot meet these obligations. Personal guarantees are often secured against personal assets such as property, giving creditors strong enforcement rights. Directors should review any guarantees they have signed before liquidation and seek advice on negotiating settlements or refinancing to reduce personal risk. While liquidation itself deals with company debts, it does not eliminate personal guarantees. This is why directors should always consider their exposure before signing guarantees and act early if the company is heading toward insolvency.