What Happens to Director Guarantees in a CVA?
A CVA can rescue the company. It does not rescue you. When your company enters a Company Voluntary Arrangement, your personal guarantee sits outside that agreement, governed by a separate contract between you and the creditor.
The bank does not vote on the CVA and then forget the form you signed at the kitchen table three years ago.
We see this misunderstanding regularly. A director spends weeks preparing a CVA proposal, gets creditor approval, breathes out, and then the bank’s solicitor sends a letter referencing the overdraft guarantee.
Or the landlord’s agent reminds you, quietly, that the rent guarantee still stands regardless of what creditors voted for.
That moment is genuinely alarming, and it is the moment many directors discover that the CVA protected the company, not them personally.
Below we explain exactly why your personal guarantee survives a CVA, when creditors are most likely to act on it, and what your real options are if you are exposed.
If you have signed a personal guarantee and your company is now in or entering a CVA, read every section before you assume the arrangement covers you.
- Director Guarantees in a CVA at a Glance
- Can a CVA Cancel Your Personal Guarantee?
- Risks to Directors with Personal Guarantees in a CVA
- What Directors Should Do About Personal Guarantees Before Entering a CVA
- Options if a Creditor Calls Your Personal Guarantee During a CVA
- Related Director Guarantee Guides
- Your Next Step
- Frequently Asked Questions About Director Guarantees in a CVA
Director Guarantees in a CVA at a Glance
Quick Answer: What Happens to a Personal Guarantee in a CVA?
It survives. A Company Voluntary Arrangement restructures the debts of the company. It does not restructure your personal obligations to creditors. A personal guarantee is a contract between you and the creditor.
The CVA is a contract between the company and its creditors.
Under section 5 of the Insolvency Act 1986, a CVA binds creditors who had notice of it; it does not extinguish guarantor obligations owed by a third party.
You, as the director who signed the form, are that third party in relation to your own guarantee.
The CVA protects the company. It does not protect the director who signed the form.
When a Director’s Personal Guarantee Becomes Relevant in a CVA
A creditor holding a personal guarantee can review that document the moment it believes the underlying debt is at risk. Entering a CVA signals exactly that.
You can expect creditors to look at their security position, including any guarantee, as soon as the CVA proposal is circulated. Some will raise it during negotiations. Others will wait and watch whether you make payments on time.
Main Risk for Directors with Personal Guarantees in a CVA
The main risk is that the company’s CVA succeeds commercially but one of your personal guarantees is still called.
If you guaranteed an overdraft that sits outside the CVA’s repayment schedule, the bank can demand repayment from you personally while the company trades on.
Your home, savings, and personal assets are all in scope. If the guarantee is secured on property, the creditor has a charge over that asset and does not need a court judgment to begin enforcement steps.
What to Do Next if You Have a Personal Guarantee and Your Company Enters a CVA
List every guarantee you have signed and check whether each one falls inside or outside the CVA proposal. Speak to an insolvency practitioner before the proposal is filed.
Do not assume a creditor who votes yes on the CVA has agreed to suspend their rights under your personal guarantee. Those are two different legal relationships, and we see directors conflate them at real cost.
Can a CVA Cancel Your Personal Guarantee?
Legal Position: Why a CVA Does Not Extinguish a Personal Guarantee
A personal guarantee is a common law contract. It is not an insolvency instrument and it is not governed by the CVA framework in the Insolvency Act 1986.
When a CVA is approved by the required 75% majority of creditors by value, it becomes legally binding on the company and on those creditors.
What it does not do, and cannot do under s.5 IA 1986, is alter the separate contractual obligations of a third party. You, as the director-guarantor, are that third party in relation to your own guarantee.
Think of it this way: the creditor has two claims. One is against the company, covering the loan or credit facility. The other is against you personally, covering the guarantee. The CVA deals with the first claim.
The second claim runs alongside it, governed entirely by the terms of the document you signed.
This separation is not a technicality. It is the commercial logic that makes banks and landlords willing to lend to small companies at all.
If a CVA could automatically release personal guarantees, creditors would not offer them in the first place.
We are direct about this because we see directors genuinely surprised by it. That surprise is costly when it arrives after the CVA proposal has been approved.
When a Creditor May Still Call a Personal Guarantee During a CVA
A creditor can call your personal guarantee whenever the terms of that guarantee allow it to do so.
The trigger is usually a default event under the guarantee document, which may include the company entering any formal insolvency process, not just liquidation.
Check the exact wording of each guarantee you have signed. If it contains a clause triggered by insolvency proceedings or an arrangement with creditors, a CVA may itself be the trigger.
Creditors who are most likely to act quickly include:
- Banks and asset finance providers, especially if the CVA restructures or defers payments on a facility they hold a guarantee against
- Commercial landlords, where rent arrears are included in the CVA and the landlord holds a rent deposit or personal guarantee
- Invoice finance companies, where the funding line is being reduced or terminated as part of the restructure
Unsecured trade creditors who hold guarantees are more variable. Some will wait to see whether CVA payments are maintained before taking action. Others will act immediately if the guarantee gives them that right.
When Negotiating a Release Becomes Possible
A creditor can agree to release or vary a personal guarantee at any point, but they are not obliged to.
In practice, releases are most negotiable when the CVA is performing well, you can offer the creditor a lump sum, or the creditor’s commercial relationship with the company is one they want to preserve.
A release agreed verbally is not enforceable. Any variation to a guarantee must be documented in writing, signed by the creditor, and kept with the original guarantee document.
We have seen creditors agree to cap or vary their guarantee rights as part of the CVA process itself, where the guarantee holder was a major creditor who needed to vote in favour for the arrangement to succeed.
That kind of negotiation has to happen before the creditor vote, not after. Once the CVA is approved, the creditor has less incentive to give anything up.
Risks to Directors with Personal Guarantees in a CVA
Secured Guarantee Risk: Your Home and the CVA
If you secured a personal guarantee against your home or another personal asset, that security does not disappear because the company enters a CVA. The creditor holds a legal charge over your property.
If the guaranteed debt is not paid, whether by the company under the CVA schedule or by you personally, the creditor can apply to enforce that charge.
For directors with mortgaged homes, this is the sharpest personal risk in the entire CVA process. Your spouse or partner, if they co-own the property, will also be affected.
The conversation about what the CVA means for the family home ought to happen with a solicitor before the CVA proposal is filed, not after the arrangement is in place.
Unsecured Guarantee Risk if the CVA Fails
If your company’s CVA fails because payments are missed, the supervisor terminates the arrangement, or creditors vote to end it, the situation changes quickly. When a CVA fails, creditors usually pursue liquidation.
At that point, the amounts that were being restructured under the CVA fall due in full. Any unsecured personal guarantee over those debts becomes immediately enforceable.
Directors who entered the CVA believing the arrangement gave them personal breathing space discover that the breathing space was only ever the company’s.
Personal Insolvency Risk if the Guarantee Is Called
If a creditor calls your personal guarantee and you cannot pay, your options narrow fast. The creditor can apply for a county court judgment, which opens the door to enforcement against your personal assets.
If the amount is large enough and you remain unable to pay, the creditor can present a bankruptcy petition against you personally.
Personal bankruptcy has consequences that run well beyond the immediate debt. It affects your ability to act as a company director, your credit position, and your professional status in certain regulated roles.
The company’s CVA would continue regardless. Your personal situation would not.
What Directors Should Do About Personal Guarantees Before Entering a CVA
Identify Every Guarantee Linked to the CVA Proposal
You need a complete list before any CVA proposal is drafted. Pull every facility agreement, lease, and credit document you signed on behalf of the company. Look for the personal guarantee or deed of guarantee attached to each one.
Pay particular attention to all-monies guarantees, which cover not just the original facility but any subsequent balances advanced under the same relationship.
- Bank overdrafts and term loans usually have a standalone guarantee document
- Commercial leases may have a personal guarantee embedded in the lease or in a separate deed
- Asset finance and hire purchase: check every schedule, not just the headline agreement
- Invoice finance facilities often carry an all-monies guarantee covering the full debtor book value
- CBILS or Recovery Loan Scheme borrowing: government-backed schemes required personal guarantees above certain thresholds from April 2021
Understand the Wording Before the Creditor Vote
There is a meaningful difference between a limited-sum guarantee, where your liability is capped at a fixed amount, and an all-monies guarantee, where you may be liable for the entire running balance of the account.
There is also a meaningful difference between a guarantee triggered by missed payments and one triggered by the company entering any formal insolvency process.
Read the trigger clauses carefully. If the guarantee document is more than a few pages long or uses unfamiliar legal language, get a solicitor to review it before the CVA proposal goes out.
The cost of that review is small compared to finding out the trigger clause activated the moment the CVA proposal was filed.
Get Specialist Advice Before the CVA Proposal Is Filed
The insolvency practitioner supervising your CVA is appointed to act in the interests of creditors, not in your personal interest as a director. Their role does not cover your personal guarantee exposure.
You need separate legal or insolvency advice focused specifically on your personal position.
We recommend arranging that advice before the CVA proposal is filed. At that stage, you still have negotiating room with creditors. After the creditor vote, your options are narrower and the creditor’s incentive to accommodate you is lower.
Options if a Creditor Calls Your Personal Guarantee During a CVA
Negotiated Settlement With the Creditor
If a creditor calls your guarantee, the first step is to establish exactly what they are claiming: the current balance, any interest, and any costs they intend to add. Then assess what you can realistically offer.
Creditors are commercial actors. If you can demonstrate that a negotiated settlement is more likely to produce recovery than lengthy enforcement, many will engage.
A lump sum offer at a discount to the full amount is often more attractive to a creditor than a slow enforcement process against a director with limited accessible assets. Any settlement must be documented.
A telephone agreement is not a release. Get the settlement confirmed in writing, with a clear statement that the creditor releases all further claims under the guarantee against you personally.
Personal Refinancing to Cover the Guarantee
If the guaranteed amount is manageable and you have personal assets, refinancing to cover the guarantee debt may be worth considering, particularly if doing so removes a secured creditor’s rights over your home.
This converts a contingent guarantee liability into a structured personal debt, which may be easier to manage if the CVA is performing and your personal income is stable.
The downside is real: you are taking on personal debt to service a company obligation. If the CVA subsequently fails, you carry the refinancing debt as well.
Our view is that refinancing makes most sense where the guarantee is secured and the CVA’s prospects are genuinely strong.
Personal Insolvency Procedures if the Liability Is Unmanageable
If the guarantee exposure is larger than you can manage from personal resources, formal personal insolvency procedures may need to be considered.
An Individual Voluntary Arrangement (IVA) is a structured agreement with your personal creditors that allows you to repay what you can afford over a fixed term, usually five years.
Bankruptcy clears the debt but disqualifies you from acting as a director while the order is in force.
Neither outcome is straightforward, and both have long-term consequences. If you are facing this situation, speak to a licensed insolvency practitioner who handles personal as well as corporate insolvency work.
We can help you find the right specialist for your circumstances.
Related Director Guarantee Guides
Risks of Signing a Personal Guarantee
If you are considering signing a personal guarantee, or have already signed one and want to understand your full exposure, our guide to the risks of signing a personal guarantee covers what you are actually agreeing to, what assets are at risk
and what the enforceability tests look like in practice.
What Happens When a CVA Fails
Understanding what happens if your CVA does not succeed is as important as understanding how it works when it does.
Our page on what happens when a CVA fails explains the creditor routes that open up, the director risks that become live, and the timeline that typically follows termination.
Your Next Step
If you have signed personal guarantees and your company is considering a CVA, your next step depends on one question: do you know exactly what each guarantee covers and what triggers it?
If the answer is no, you are not yet ready to approve a CVA proposal. A CVA can be the right outcome for the company.
But it does not resolve your personal exposure, and entering one without a clear view of your guarantee position can leave you with the company stabilised and your personal finances at serious risk.
Directors with no personal guarantees, or with limited-sum guarantees on debts comfortably inside the CVA schedule, are in a materially different position. For them, the CVA may genuinely resolve the immediate pressure.
For directors with all-monies guarantees, secured guarantees, or guarantees held by creditors outside the CVA proposal, the arrangement alone is not enough.
The right next step is to speak to a licensed insolvency practitioner about both the company’s CVA and your personal exposure in parallel.
We work with directors facing exactly this position and can introduce you to the right specialist for your situation. Contact our CVA team for a confidential conversation about what the arrangement means for you personally.
Frequently Asked Questions About Director Guarantees in a CVA
Does a creditor voting yes on a CVA mean they give up their personal guarantee rights?
No. A creditor voting to approve a CVA is agreeing to the arrangement’s repayment terms as they affect the company. They are not agreeing to release you from your personal guarantee.
The guarantee is a separate contractual obligation and it continues on its original terms unless the CVA proposal itself includes a specific negotiated term releasing or varying it. Any release must be documented in a separate written agreement signed by the creditor.
Can a CVA proposal include terms that release a personal guarantee?
A CVA proposal can include commercially negotiated terms with individual creditors, including a variation or release of a specific guarantee, but only if that creditor explicitly agrees to it as part of the arrangement. It is not a standard term.
If you want a guarantee release included in the CVA, that negotiation must happen before the proposal is finalised and the creditor vote takes place. Raising it after approval is much harder, because you have no leverage at that point.
What happens to my personal guarantee if the CVA fails and the company goes into liquidation?
If the CVA fails and the company enters liquidation, any guaranteed debts that remain unpaid become immediately callable against you personally. The CVA will have reduced the outstanding balances if payments were made during the arrangement’s life, but the residual amount after the CVA collapses will usually still be recoverable under the guarantee.
Creditors who have been receiving reduced CVA payments for 12 or 24 months may take a harder position when the arrangement fails. Getting advice at the first sign of CVA difficulties, before failure is confirmed, gives you more options.
If two directors both signed the same guarantee, can the creditor pursue both of us?
Yes. If the guarantee is joint and several, which most co-director guarantees are, the creditor can pursue either or both of you for the full amount. They are not required to split the claim between you. In practice, creditors pursue whoever has the most accessible assets.
If your co-director has no reachable assets, the full amount falls to you. Your liability depends not just on your own position but on your co-director’s. Check the guarantee itself and any accompanying indemnity agreement between the directors, which may give you a right of contribution if one of you ends up paying more than their share.
Is there such a thing as personal guarantee insurance, and does it help during a CVA?
Personal guarantee insurance (PGI) exists as a product in the UK market and can cover a proportion of the sum called under a personal guarantee if the company becomes insolvent. However, most PGI policies must be taken out before the insolvency event occurs.
You cannot buy this cover once your company is already in a CVA or heading into one. If you have existing PGI cover, check your policy wording carefully: a CVA may or may not be a qualifying trigger event, and the claim process has specific requirements. If you do not yet have PGI, it is worth understanding what it covers for future exposure.
Can a CVA be a better option than liquidation when personal guarantees are involved?
It can be, but the comparison is not simple. In a CVA versus liquidation, the critical variable for a director with personal guarantees is whether the CVA reduces the outstanding balance owed to each guaranteed creditor faster than liquidation would.
If the CVA makes meaningful payments over three to five years, the amount you could be called upon to pay under each guarantee falls accordingly. In a liquidation, the full unpaid balance at the point of winding up may be called immediately. However, if the CVA is likely to fail, you are simply delaying that exposure while adding risk.
Can a personal guarantee ever be challenged or set aside?
In limited circumstances, yes. Guarantees have been successfully challenged where they were improperly executed, where the guarantor was subjected to undue influence or misrepresentation, or where the guarantee document was materially different from what was described at signing.
The leading case on undue influence in guarantee disputes is Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44. These challenges are fact-specific, expensive to run, and succeed in a minority of cases. They require specialist legal advice. Do not assume your guarantee can be challenged simply because it feels unfair.
