A guarantee is an undertaking by one person (the guarantor) to perform an obligation of another person (a borrower or other debtor), given in favour of the person to whom that obligation is owed (the beneficiary). A guarantee is what is known as a “secondary” obligation – this means that the guarantor is only liable if the borrower or debtor has failed to perform the “primary” obligation, which is the obligation of the borrower or debtor which has been guaranteed. In the context of a loan agreement, a guarantee is an undertaking from the guarantor to the lender that the borrower will perform the borrower’s obligations under the loan agreement, the most relevant obligation being to repay the loan and interest. If the borrower does not pay, the guarantor will perform the obligation itself and make the payment instead of the borrower.

Why are guarantees also given as indemnities?

Guarantees are almost always drafted both as a guarantee and as an indemnity. Unlike a guarantee, an indemnity is a “primary” obligation – it is an undertaking from one person (the guarantor) to pay the beneficiary if the beneficiary suffers loss as a consequence of a specified event. In the case of an indemnity which is part of a guarantee for a loan, the specified event is the non-payment of the loan or other breach of the loan agreement. As a primary obligation of the guarantor, the indemnity is independent of the obligations of the debtor or borrower. An indemnity should, unlike a guarantee, remain in effect should the underlying loan agreement or equivalent transaction be set aside or if the borrower is somehow discharged from its obligations under the loan agreement.

What are the formalities of a guarantee?

A guarantee must be in writing and signed by the guarantor (or the guarantor’s agent). It is usual also for a guarantee to be executed as a deed, to avoid an argument that it lacks contractual consideration.

Does an individual require independent legal advice before giving a personal guarantee?

To avoid the possibility of a guarantee given by an individual being potentially set aside by reason of the guarantee having been given under duress or having been procured by undue influence, a lender may require the individual guarantor to seek independent legal advice before entering into the guarantee. This is particularly the case if the individual guarantor is the husband or wife of a shareholder of the corporate borrower.

Guarantee: individual guarantor

Name: Guarantee: individual guarantor - PaperRock Documents
SKU: FIN008.001
Price: 35.00 GBP
Availability: InStock

This Guarantee is for an individual to guarantee the obligations under a loan agreement of another company. It is suitable where the borrower is a company incorporated in England and Wales.

When do I use this document?

Guarantee from an individual (as opposed to a company) for a corporate borrower’s obligations under a loan agreement. The guarantee is in the form of a standalone Deed of Guarantee between the guarantor and the lender

Use this document:

for a guarantee to be given by an individual for a company’s obligations under a loan agreement
for a guarantee in the form of a standalone Deed of Guarantee
where the borrower is a company incorporated in England and Wales

What key features are included?

13 clauses over 6 pages
standalone deed of guarantee
guarantee undertakings given by way of both guarantee and indemnity
standard creditor protections for the continuing effect of the guarantee
limit of liability of guarantor for up to a specified amount
warning notice to guarantor to take independent legal advice

What else do I need to know?

A lender will typically require that an individual guarantor takes independent legal advice before entering into the guarantee. This is done to avoid the possibility of a guarantee being potentially set aside by reason of the guarantee having been given under duress or having been procured by undue influence. This is particularly the case if the individual guarantor is the husband or wife of a shareholder or director of the corporate borrower.

The lender will also require that the independent legal advisor confirms in writing to the lender that the guarantor has received independent legal advice on the guarantee, that the guarantor understood that advice and is willing to enter into the guarantee. For a form of independent legal advice letter, see

Individual guarantor: independent legal advice letter.

What other documents are available?

For a form of guarantee to be given by a company (as opposed to an individual), see

Guarantee: corporate guarantor

For a guarantee clause to be included in a loan or other agreement, see

Guarantee: contract clause

Description

When do I use this document?

where one or more shareholders wish to remove a director
where the Articles of Association do not include a simpler removal process
as special notice pursuant to the Companies Act 2006 to remove a director

Key features

special notice required to remove a director from office
including an ordinary resolution to remove a director, for use by either a single shareholder or multiple shareholders
alternative forms covering:
- removal of director only
- removal of director and appointment of replacement director

What else do I need to know?

Under section 168 of the Companies Act 2006, shareholders can remove a director by passing an ordinary resolution at a general meeting. This decision cannot be made by written resolution. The shareholder proposing the removal must give formal notice to the company. The Articles of Association cannot override this statutory process or change the notice periods required for the process.

Once the company receives special notice, the board must call a shareholder meeting. This meeting must take place at least 28 days after the notice is received. The director facing removal has the right to submit written representations, which the company must circulate to shareholders before the meeting.

The special notice may also propose appointing a new director to replace the one being removed.

In some companies, weighted voting rights can protect shareholder-directors being removed from office by granting them extra votes on removal resolutions. This is common in joint ventures, multi-shareholder businesses, or investor agreements where director rights need protection.

Being removed as a director does not affect employment rights, but it may lead to legal claims, such as wrongful dismissal. If the removed director is also a shareholder, they may claim unfair prejudice under the Companies Act 2006 – particularly in quasi-partnerships, where they expected to be involved in management. If the claim succeeds, the court may order other shareholders to buy their shares at fair value.

Explanatory Guides

As with all of our document templates, your purchase will include access to clear explanatory guidance on the document and its use.

£35.00 exc VAT

Updated by a lawyer on 04/09/2024

Updated By a lawyer on 01/05/2023

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Guarantee: individual guarantor

When do I use this document?

What key features are included?

What else do I need to know?

What other documents are available?

When do I use this document?

Key features

What else do I need to know?

Explanatory Guides

As with all of our document templates, your purchase will include access to clear explanatory guidance on the document and its use.

Create your document in 3 Easy Steps

PaperRock offers affordable, legal document templates, written by experienced and expert lawyers, trusted by businesses across the UK and beyond. No hidden charges or trial sign-ups are required to complete your document.

“I have worked in legal and business affairs for over 25 years and need access to a wide range of corporate and commercial legal precedents. Paperrock is a refreshing source of high-quality legal templates. Superb value for money.”

Amanda | Bannister Creative

“It’s hard to find legal documents on the internet you can really trust. Knowing an expert lawyer has drafted what I need, gives my business the edge and gives me peace of mind.”

Elle, Founder | Winslow skincare & aesthetics.

“As an SME Paperrock saves us the legal fees we’ve previously had to spend. In these challenging times that's a big help. Great products and support.”

Giles, MD | Boniti Ltd.

Guarantee: individual guarantor

When do I use this document?

What key features are included?

What else do I need to know?

What other documents are available?

When do I use this document?

Key features

What else do I need to know?

Explanatory Guides

As with all of our document templates, your purchase will include access to clear explanatory guidance on the document and its use.

Related Articles

Create your document in 3 Easy Steps

PaperRock offers affordable, legal document templates, written by experienced and expert lawyers, trusted by businesses across the UK and beyond. No hidden charges or trial sign-ups are required to complete your document.

“I have worked in legal and business affairs for over 25 years and need access to a wide range of corporate and commercial legal precedents. Paperrock is a refreshing source of high-quality legal templates. Superb value for money.”

Amanda | Bannister Creative

“It’s hard to find legal documents on the internet you can really trust. Knowing an expert lawyer has drafted what I need, gives my business the edge and gives me peace of mind.”

Elle, Founder | Winslow skincare & aesthetics.

“As an SME Paperrock saves us the legal fees we’ve previously had to spend. In these challenging times that's a big help. Great products and support.”

Giles, MD | Boniti Ltd.

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