Our solicitors provide independent legal advice for personal guarantees where lenders require confirmation that the guarantor fully understands the legal and financial implications of the agreement.
A personal guarantee is a legal commitment where an individual agrees to repay a company’s debt if the business cannot meet its financial obligations. Because signing a personal guarantee can expose the guarantor to significant financial liability, lenders usually require the guarantor to obtain Independent Legal Advice (ILA) before the guarantee becomes legally effective.
If the borrower fails to repay the debt, the lender may pursue the guarantor personally for repayment, which may include enforcement against personal assets such as savings, investments, or property.
Why Independent Legal Advice Is Required for a Personal Guarantee
Lenders require Independent Legal Advice to ensure that the guarantor understands the nature and risks of the guarantee they are signing.
This requirement stems from legal principles confirmed in Royal Bank of Scotland v Etridge, which established that lenders must take reasonable steps to ensure guarantors enter agreements freely and with full understanding.
During an Independent Legal Advice appointment, a solicitor will:
- Explain the terms of the personal guarantee
- Clarify the extent of your liability
- Identify potential financial risks
- Confirm that you are signing voluntarily and without undue pressure
Following the advice, the solicitor will usually provide a certificate of Independent Legal Advice required by the lender before the transaction can proceed.
Our Independent Legal Advice Service for a Personal Guarantee
Our solicitors regularly advise directors, shareholders, and individuals who are asked to sign personal guarantees.
During your appointment, we will:
- Review the personal guarantee document
- Explain the legal and financial implications in clear terms
- Identify key risks or unusual clauses
- Answer any questions you may have before signing
Appointments are available in person at our office or remotely via secure video call (Zoom). Where transactions are urgent, we may also be able to offer same-day appointments to help avoid delays.
Once the advice has been provided, we will issue the solicitor’s certificate required by your lender confirming that Independent Legal Advice has been given.
When You May Need Independent Legal Advice for a Personal Guarantee
Independent Legal Advice is commonly required for:
- Director’s personal guarantees
- Commercial loan agreements
- Business finance facilities
- Joint borrower arrangements
- Mortgage or security documents
Obtaining legal advice ensures that you understand the obligations you are taking on and the potential consequences if the borrower defaults.