Personal Guarantees

Our remarkable advice

In the vast majority of cases, lending to the SME market is supported by personal guarantees from the company directors or shareholders.

Unfortunately, not all small businesses succeed – and when circumstances are against them, you may have to turn to the directors and shareholders to recover the company’s debts.

It’s a tricky situation for everyone involved, but at Moorfields we’re happy to help you through it. From working out whether the case is worth pursuing right to the end of the recovery process, we can help you to devise a strategy for recovering maximum funds with minimal risk.


Our remarkable advice can be divided into two stages:

Pre-bankruptcy – how it works

  1. First, we collate and review all the documentation relating to the guarantee. If there is more than one guarantor, the liability may be joint and several.
  2. We draft a letter before action and demand the guarantor settle the amount outstanding. If they are unable to pay, we invite them to a meeting to discuss their current financial position.
  3. Based on the evidence provided and the degree of co-operation, we try to negotiate a settlement.
  4. If payment is not forthcoming, we consider enforcement options. These may include placing a charging order on the guarantor’s property to protect the lender’s position, or issuing a statutory demand for bankruptcy and pursuing the bankruptcy procedure.


Post-bankruptcy – how it works

  1. Once a bankruptcy order has been issued, the official receiver initially becomes the trustee. However, if the lender is the majority creditor, they can immediately request a Secretary of State appointment for the trustee of their choice.
  2. The trustee (that’s us) asks the guarantor to attend an interview to establish their assets, liabilities, income and expenditure, and commence the realisation of assets. If the guarantor fails to attend or co-operate, we will apply to the court for a private examination.
  3. A restriction is immediately placed at HM Land Registry in respect of property in which the guarantor has an interest.
  4. We can then realise the assets of the guarantor – even if they’re in another country.
  5. The bankruptcy petition costs will then be recoverable from the first realisations.