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Are personal guarantees a type of security?

We often take personal guarantees from directors and shareholders.  These personal guarantees are a type of “quasi-security”, because the security is not being given by the borrower itself.  We often find that, where borrowers are unable to pay their debts, their guarantors would rather pay off the debts than enter into an individual voluntary arrangement or be made bankrupt.

Although a personal guarantee may provide additional comfort to investors, it does not guarantee that the debt will be fully recovered. A guarantee from the director(s) allows us to pursue them for the outstanding loan amount. 

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