Director Liability for CBILS Loans: What UK Company Directors Need to Know
CBILS loans above £250,000 could include personal guarantees from directors. If your company received a CBILS facility with a personal guarantee attached and the company cannot repay, the lender can call in that guarantee and pursue you personally for the shortfall.
We work with directors who assumed all government-backed COVID loans were guarantee-free. Bounce Back Loans were. The government covered 100% and no personal guarantees were permitted. But CBILS (Coronavirus Business Interruption Loan Scheme) was different.
The government guaranteed 80% of the loan to the lender, but the lender could still require a personal guarantee from the director for facilities above £250,000. We see directors who signed CBILS personal guarantees in the urgency of 2020 and are now facing calls they did not anticipate.
Quick Answer on CBILS Personal Liability for Directors
If your CBILS facility was above £250,000 and included a personal guarantee, you are personally liable for the guaranteed amount if the company defaults. The government’s 80% guarantee protects the lender, not you.
The lender recovers 80% from the government guarantee and can pursue you for the remaining 20% (or more, depending on the guarantee terms). Some CBILS guarantees covered the full loan amount, not just the 20% gap.
If your CBILS facility was £250,000 or under, no personal guarantee was permitted under the scheme rules. If your lender required one anyway, it may be unenforceable. We advise checking the facility agreement and taking legal advice if you believe a guarantee was improperly required. Our guide on unenforceable personal guarantees covers the technical grounds.
How CBILS Personal Guarantees Work in Insolvency
When the company enters liquidation, the CBILS lender submits a claim in the liquidation for the full loan balance. Whatever the liquidation produces reduces the total debt. The government guarantee covers 80% of any shortfall. The remaining 20% falls on the personal guarantee, which falls on you.
We see two patterns. In the first, the guarantee covers only the 20% not covered by the government guarantee. The director’s personal exposure is capped at 20% of the original loan.
In the second, the guarantee covers the full loan amount, and the government guarantee is separate. The director’s exposure is the full loan less whatever the liquidation and government guarantee produce.
We tell directors: read your CBILS facility agreement. The guarantee clause specifies exactly what you guaranteed and what limits (if any) apply. Do not assume the government guarantee protects you. It protects the lender.
CBILS Guarantee Restrictions: What the Scheme Rules Said
- Facilities of £250,000 or under: No personal guarantees were permitted. If your lender required one, it may breach the scheme terms.
- Facilities above £250,000: Personal guarantees were permitted, but the lender could not take security over the director’s principal private residence as part of the guarantee. A guarantee secured against your home for a CBILS loan may breach the scheme terms.
- The government guarantee is to the lender, not to you. If the company defaults, the government pays the lender 80%. You do not receive any protection from the government guarantee.
We stress the residential property restriction because it is the most commonly breached rule we see. If your CBILS guarantee includes a charge on your home, the lender may have breached the scheme terms.
This does not automatically invalidate the guarantee (the contractual obligation may still stand), but it provides grounds for challenge and negotiation. Take specific legal advice.
Can You Negotiate a CBILS Guarantee Down?
Yes. The same principles apply as for any personal guarantee negotiation. Lenders accept reduced settlements when: the director engages early, provides a full financial disclosure, and makes a credible offer.
We have seen CBILS guarantees settled at 30 to 50% of the called amount when the director acted before enforcement proceedings began.
The additional leverage with CBILS guarantees is the scheme restrictions. If the lender breached the scheme terms (requiring a guarantee on a sub-£250,000 facility, or taking security over your home), that breach strengthens your negotiating position even if it does not invalidate the guarantee entirely.
What You Should Do If You Have a CBILS Personal Guarantee
- Find and read your CBILS facility agreement. Identify the guarantee clause, the guaranteed amount, and whether the guarantee is secured against any personal property.
- Check the scheme restrictions. Was the facility above or below £250,000? Is the guarantee secured against your home? If either restriction was breached, you have grounds to challenge.
- If the company is in difficulty, engage with the lender early. Proactive negotiation produces better outcomes than reactive enforcement defence.
- If the company is approaching insolvency, speak to a licensed insolvency practitioner. They can advise on both the company’s route and your personal CBILS exposure.
- Take personal legal advice on the guarantee. A solicitor who understands both guarantee law and the CBILS scheme rules can assess whether the guarantee is enforceable and advise on negotiation strategy.
Company Debt connects directors with licensed insolvency practitioners who handle CBILS-related insolvencies. A confidential consultation will clarify your personal CBILS exposure and your options.
FAQs on CBILS Personal Liability
Am I personally liable for my company’s CBILS loan?
Only if you signed a personal guarantee. CBILS loans of £250,000 or under should not have personal guarantees. Loans above £250,000 could include them. Check your facility agreement for a guarantee clause.
Does the government guarantee protect me personally?
No. The government’s 80% guarantee protects the lender, not the director. It means the lender recovers 80% from the government and can pursue you for the remaining 20% (or more, depending on your guarantee terms).
Can the lender take my house for a CBILS guarantee?
The CBILS scheme rules prohibited lenders from taking security over the director’s principal private residence as part of a CBILS guarantee. If your guarantee includes a charge on your home, the lender may have breached the scheme terms.
Take legal advice. This provides grounds for challenge and negotiation.
