What happens to personal guarantees if we shut down the company?

Personal guarantees remain fully enforceable after company closure—shutting down the company does not eliminate personal guarantee obligations, which is why they create such significant risk for directors. When you sign a personal guarantee for company debts such as bank loans, leases, or supplier credit, you are personally promising to repay if the company cannot. Once the company enters liquidation or is dissolved, creditors holding personal guarantees can and typically do pursue the guarantors personally for the full outstanding amounts. The process usually works as follows: when the company fails, the creditor assesses whether the company has assets to repay the debt through liquidation; if company assets are insufficient (which is usually the case in insolvency), the creditor turns to the personal guarantors; the guarantor is formally notified of the claim and given opportunity to pay; if payment is not made, the creditor can take enforcement action including County Court Judgments, charging orders against property if the guarantee was secured, and ultimately bankruptcy proceedings if the debt is substantial and remains unpaid. Several important points about personal guarantees in insolvency: First, guarantees are separate legal obligations from the company debt—the fact that the company is in liquidation doesn't affect your personal liability under the guarantee. Second, if multiple directors guaranteed the same debt, creditors can pursue any or all guarantors for the full amount (joint and several liability), though ultimately the total recovered cannot exceed the debt plus costs. Third, if your guarantee was secured against your home or other personal assets, creditors have direct claim against those assets and may force sale to recover the debt. Fourth, you cannot simply walk away from personal guarantees—they must be settled, negotiated, or dealt with through personal bankruptcy if you cannot pay. Some options for managing personal guarantee liability include: negotiating with creditors to settle for less than full amount, particularly if you can demonstrate that your personal financial position means they'll recover more through negotiated settlement than through bankruptcy; offering installment payment plans if you have ongoing income but cannot pay lump sums; seeking contributions from co-guarantors if others guaranteed the same debt; using any personal assets or savings to settle before enforcement escalates; or in extreme cases, personal bankruptcy if debts are overwhelming and there's no realistic way to pay. The timing of company closure can affect guarantee exposure—if you place the company into voluntary liquidation before creditors force compulsory liquidation, you may have slightly more opportunity to negotiate with guarantee holders, though this is marginal. Some directors mistakenly believe that specific types of company closure (dissolution vs liquidation) affect personal guarantees—they don't. Once the company cannot pay the guaranteed debt, the guarantee is triggered regardless of how the company closed. Prevention is always better than cure with personal guarantees: before signing any guarantee, carefully consider whether you can afford the exposure if the business fails; seek to limit guarantees where possible (capped amounts, limited duration); avoid giving guarantees secured against your home if possible; and be especially cautious about guaranteeing debts when business is already struggling, as this can convert company problems into personal catastrophe. If you're facing company failure and you know you have personal guarantees, address them proactively: compile a list of all guarantees with amounts and creditors; assess your personal financial position and ability to pay; seek advice from insolvency practitioners or solicitors about options for managing the exposure; consider whether proposing payment plans before default might secure better terms; and understand that ignoring guarantees doesn't make them go away—creditors will pursue you eventually, and dealing with them proactively often produces better outcomes than waiting for enforcement. Finally, if guarantees threaten to bankrupt you and destroy your personal financial security, seek professional advice about whether personal bankruptcy might actually be the most appropriate solution, as it provides a structured process for dealing with overwhelming debt and eventual discharge rather than years of unmanageable creditor pressure.