Last reviewed and updated: May 2026. By Mark Harley, Principal Solicitor, Boss Lawyers.
This is part one of a six-part series on credit applications and the terms and conditions that accompany them. We examine each of the key provisions that Queensland businesses should understand when extending credit — starting with personal guarantees.
What Is a Personal Guarantee in a Credit Application?
A personal guarantee is a legally binding commitment by an individual — typically a director or shareholder of a company — to personally repay a debt or perform an obligation if the primary borrower (usually the company) fails to do so. In a credit application context, it is common for suppliers and financiers to require the directors of a customer company to provide personal guarantees as a condition of extending trade credit.
Personal guarantees are one of the most powerful tools available to creditors in Queensland — and one of the most dangerous documents a director can sign without understanding the implications.
What Does a Personal Guarantee Cover?
The scope of a personal guarantee depends on its terms. Common provisions include:
- All monies clauses: These extend the guarantee to cover all amounts owed by the debtor company to the creditor, whether at the time of signing or in the future. Courts have consistently enforced these clauses in Queensland.
- Continuing guarantees: The guarantee remains on foot until formally discharged, even if the guaranteed debt is paid off and re-advanced.
- Joint and several liability: If multiple directors sign, each can be pursued for the full amount — not just their proportional share.
- Indemnity provisions: Many guarantees include an accompanying indemnity, which may be broader than the guarantee itself and can cover losses even where the guarantee is technically unenforceable.
Can a Personal Guarantee Be Set Aside?
Queensland courts can set aside or refuse to enforce a personal guarantee in limited circumstances, including:
- Unconscionable conduct by the creditor (under the Australian Consumer Law or equitable principles)
- Misleading or deceptive conduct in procuring the guarantee
- Undue influence or duress
- Material misrepresentation about the nature or extent of the guarantee
- Failure to comply with the Property Law Act 1974 (Qld) formalities (the guarantee must generally be in writing and signed)
However, these defences are difficult to establish and should not be relied upon as a reason to sign without understanding the document. The best protection is to obtain legal advice before signing.
The Risk of Signing a Personal Guarantee as a Director
When a director signs a personal guarantee, they expose their personal assets — their home, savings, and other property — to the creditor’s claims. If the company fails and cannot pay its debts, the creditor can pursue the guarantor personally. This risk is particularly acute in Queensland’s current economic environment, where insolvency rates in construction, retail, and hospitality remain elevated.
Directors should carefully consider:
- The maximum potential exposure under the guarantee
- Whether the guarantee is limited in time, amount, or scope
- Whether they can negotiate more favourable terms (e.g., a cap on liability)
- What assets they have at risk if the company fails
Creditor Strategies: Enforcing a Personal Guarantee in Queensland
For creditors, a well-drafted personal guarantee is an essential part of the credit approval process. Key steps to ensure enforceability include:
- Ensuring the guarantee is executed as a deed (to avoid consideration issues)
- Obtaining independent legal advice certificates where appropriate
- Perfecting the guarantee under the Personal Property Securities Act 2009 (Cth) if applicable
- Maintaining accurate records of the guaranteed debt
If a guarantor defaults, Boss Lawyers can advise on the most effective enforcement strategy — from letter of demand through to litigation and judgment enforcement.
How Boss Lawyers Can Help
Boss Lawyers acts for both creditors seeking to enforce personal guarantees and directors seeking advice on their obligations and potential defences. Our team has extensive experience in credit agreement disputes, guarantee enforcement, and insolvency-related liability across Queensland.
Contact us on 1300 267 711 or visit our Commercial Litigation page to speak with Mark Harley about your situation.
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
