How Do You Get Released From a Director's Guarantee in Australia?
Business Owners HubRelease Routes · Director's Guarantee · Banking Code
There are four practical routes that can end liability under a director's guarantee, and resigning, selling or winding up the company is not one of them. This guide follows the whole Australian customer journey: before you sign, while the facility is running, when you sell or refinance, when a demand arrives, and after a creditor says it will release you. It also shows how to check for separate landlord, supplier and other guarantees that may still survive.
Quick Answer
A director's guarantee can end in four practical ways in Australia: the creditor releases you in writing; the creditor accepts a replacement guarantor and releases you; the guaranteed liability is fully repaid or refinanced so there is nothing left for that guarantee to answer for; or, rarely, the guarantee is successfully challenged on legal grounds. Resigning as a director, selling your shares or winding up the company does not by itself end the guarantee. Check any continuing or all-obligations wording before treating a payout as the end.
Start where you actually are
People arrive on this page in very different situations, and the right first move is not the same for all of them. Find yours.
- You are about to sign one. Read how far each type reaches and what a subscribing bank has to tell you first. Ask about a limit, all-obligations wording and the release mechanism before you sign, not after.
- You are leaving, selling, or bringing in a partner. Go to the four exit routes and when to ask. Put the release into the transaction as a condition to be completed, rather than assuming the share sale transfers your guarantee.
- You are refinancing or paying a facility out. Read the refinance section and then the release-completion checklist. Paying one facility out is not enough if an all-obligations or continuing guarantee still covers something else.
- The lender has said yes to a release. Do not stop at the email. Use the completion checklist so you leave with the actual release evidence, the correct facility references and any separate security discharge that is also required.
- A demand has arrived. Go straight to what happens after a demand and speak to a solicitor before you reply. A demand, judgment and bankruptcy notice are different documents with different consequences.
- The company is failing, or has already been wound up. Read whether liquidation ends the guarantee. It does not by itself. A solicitor and registered insolvency practitioner are the people to speak to before company money is moved or personal arrangements are made.
- You have several lenders, a lease or supplier accounts. Go to the separate-guarantees section. One release does not clean up every guarantee you have ever signed. Build a guarantee register and close them creditor by creditor.
- You are not sure whether you ever signed one. Go to how to find the document. Start with the facility and settlement records, your solicitor and the creditor rather than relying on memory.
- You are applying for a home loan or personal credit next. Read the FAQ on credit reporting and guarantees and consider getting a copy of your credit report before you apply. A guarantor role and any later default, judgment or bankruptcy can matter to the next lender.
- You are here about a residential home-loan guarantor. This guide is about business-purpose guarantees. This section explains the difference and points you to the government consumer source.
What is a director's guarantee, and what does signing one commit you to?
A director's guarantee is a personal promise you give a creditor that you will pay your company's debt if the company does not pay it. Signing one puts your own assets behind a company obligation. It is a separate contract from the loan, made between you and the creditor, which is why almost everything people assume about it turns out to be wrong: it does not end when you stop being a director, it does not end when the company is sold, and it does not end when the company is wound up.
Also called: directors guarantee, director guarantee, personal guarantee, director's personal guarantee.
Lenders ask for one because a company can be an empty vehicle. Limited liability is the point of a company, and a creditor lending to a small company with few assets is lending against a structure that can be closed. The guarantee is how the creditor reaches past the structure to the person running it. That is also why it is so common: on small business credit the personal covenant is closer to the default than the exception, and being asked for one is not a signal that anything is wrong with your file. If the business is running on an unsecured business overdraft, or the company is asset rich and cash poor, expect it to be asked for.
A guarantee and an indemnity are not the same thing, and most commercial documents contain both. A guarantee is a secondary promise: you are answering for someone else's default, so your liability depends on the company's liability existing. An indemnity is a primary promise: you agree to make good a loss in your own right, and it can survive situations where the underlying obligation is unenforceable or has been set aside. In practice this means the indemnity clause is often the harder of the two to resist, and it is the clause people skip over because it is not what the document is called. The definition node for the instrument itself sits in the glossary entry for a director's guarantee, and the person who gives one is the guarantor.
What is in a guarantee document, and what to read before you sign
A guarantee document is short relative to what it does. The clauses that decide how much of your life it touches are usually these: the definition of the guaranteed liability, which tells you whether you are standing behind one named facility or everything the company will ever owe that creditor; the limit, if there is one, and whether it is a dollar amount or the value of a named security; whether the guarantee is continuing, which keeps it alive across future advances and redraws; whether it is joint and several, which decides whether the creditor can come to you alone for the whole amount; the indemnity clause sitting alongside the guarantee; and the release mechanism, which usually says the creditor releases you when it chooses to and not before.
Read those clauses before you sign, and take the document to a solicitor if anything in them is not clear to you. Switchboard does not draft, supply, host or recommend guarantee documents, and neither a template nor a generic form is a substitute for advice on the document actually in front of you. The point of reading it is not to redraft it yourself. It is to know what you are agreeing to, and to ask the creditor to change it before you sign rather than after.
How do you find out whether you signed one, and how do you get a copy?
Start with the facility and settlement records and ask the creditor for a copy. Do not rely on memory or assume an ASIC company search or a PPSR search will give you the guarantee document. The records that normally answer the question are the loan offer and security schedule, the signed settlement pack, the creditor's own file and the solicitor's file.
If what you are looking for is a blank guarantee form or template, that is a different search and this is the wrong page for it. Switchboard does not draft, supply, host or recommend guarantee documents, and a generic template is not a substitute for advice on the document a particular creditor is asking you to sign. If you need a guarantee drawn or reviewed, that is a solicitor. What follows is about finding a guarantee you have already given.
Four places to look, in the order that usually works:
- The loan offer and its schedule of securities. A guarantee is almost always listed there by name, alongside any mortgage or general security agreement, even where the guarantee document itself is separate.
- The settlement pack from the solicitor who acted on the loan. If a solicitor certified or witnessed your signature, that firm holds a file, and firms keep those files for years after the matter closes.
- The lender, in writing. Ask for copies of every guarantee it currently holds from you, not just the one attached to the facility you are thinking about. This is the request that most often surfaces the guarantee nobody remembered.
- Your accountant or company records. They may contain a note or copy that points you back to the signed facility pack, but treat the signed creditor or solicitor copy as the document to verify.
There is one formal route, and it comes with a catch that runs through this whole page. Under paragraph 117 of the 2025 Banking Code of Practice, a subscribing bank will give a guarantor additional copies of their guarantee information on request, within 30 days. Read on 2 September 2026. The catch is that paragraph 117 does not apply to a Sole Director Guarantor, a Commercial Asset Financing Guarantor, a Trustee Guarantor or a Partnership Guarantor. If you are the only director of the borrowing company, that route is closed to you and you are back to asking the lender as a matter of goodwill rather than as a Code commitment.
| Instrument | What it actually is | Who holds it | Why it gets confused with a director's guarantee |
|---|---|---|---|
| Director's guarantee | Your personal promise to pay the company's debt if the company does not | The creditor the company borrowed from | This is the instrument. Everything below shares a word with it and does something different |
| Personal guarantee | The general term for an individual answering for someone else's debt | Whichever creditor took it | In small business lending it describes the same instrument. A director's guarantee is a personal guarantee given by a director |
| Indemnity | A primary promise to make good a loss in your own right, not conditional on the company's liability existing | The same creditor, usually in the same document | It sits inside the guarantee document, is not named in the title, and is usually the harder of the two to resist |
| Bank guarantee | An undertaking a bank gives on your behalf to a third party, usually a landlord, backed by cash or a facility | The landlord or other beneficiary | The bank is giving the guarantee, not receiving one. It is the opposite direction to the guarantee you give the bank |
| Director's loan | Money moving between the company and you personally, with its own tax treatment | Nobody outside the company. It is an internal balance | Same two words, opposite direction. It is a question for your accountant, not your lender |
| Lease guarantee | Your personal promise to the landlord covering the company's obligations under the lease | The landlord | It is a personal guarantee, but a different counterparty entirely. Releasing the lender does nothing to it |
| Corporate guarantee | Another company in the group answering for the borrower's debt | The creditor | It can sometimes stand in place of your personal covenant, which is why it appears again further down this page |
Qualifier: this table names what each instrument is and who holds it, in general terms. It does not interpret your document. Which of these you have actually signed is answered by reading the document itself, and by a solicitor where the wording is not clear.
Once you find it, what should you record so you do not lose track again?
Keep a one-page guarantee register for every personal guarantee you sign. Record the creditor, the exact borrowing entity, the facility or contract it supports, the date, any stated limit, whether the wording is continuing or all obligations, any property or other security sitting behind it, the co-guarantors, and where the signed copy is stored. When a guarantee ends, add the date and the release evidence.
Practical file control
The useful test is simple: could you answer these questions in five minutes if you sold the business tomorrow?
- Which creditors hold a personal guarantee from you?
- Which company or trust debt does each guarantee cover?
- Is it limited, continuing or all obligations?
- Is a home or other asset separately mortgaged or charged behind it?
- What written document proves any old guarantee was released?
This is record keeping, not legal advice. The signed documents decide your liability. The register exists so the documents can be found and checked before a sale, refinance or demand makes the question urgent.
Is a director's guarantee the same as going guarantor on a home loan?
No. They share a word and almost nothing else. A home loan guarantee is consumer credit: a family member supports a residential borrower, and the whole consumer credit regime sits around it. A director's guarantee is given on business purpose debt by a person who is inside the borrowing company, and business purpose credit is regulated very differently. Different borrower, different loan purpose, different protective regime.
The confusion matters because it dominates how people search for this. Type a question about getting out of a personal guarantee into a search engine in Australia and the results come back almost entirely about residential guarantors. If you follow that advice you will be reading about a process that does not apply to you, run by rules your facility does not sit under, on the assumption that a wage earner is standing behind a home loan. None of it transfers.
If you are actually here about a residential guarantee, stop here and go to the right source. The government's Moneysmart service covers going guarantor on a loan properly, and it is the place to start. The rest of this page is about business purpose debt and will not help you.
The overlap that does exist is the family home, because a director's guarantee is often supported by a mortgage over it. That is a different question again, and the estate deals with it in using the family home as security for a business loan. If your question is about how a self-employed borrower is assessed on residential lending, that sits in the self-employed home loans guide rather than here.
Limited, unlimited or joint and several: how far does your guarantee reach?
How far your guarantee reaches is decided by the wording: whether it has a stated limit, whether it is continuing or all obligations, and whether it is joint and several. A limited guarantee has a stated boundary. An unlimited guarantee has no stated ceiling in the document. Joint and several wording can let the creditor pursue one guarantor for the guaranteed liability rather than dividing the claim between guarantors.
On a Code covered loan given to a subscribing bank, the guarantee will be limited either to a specific amount or category of amounts, or to the value of a specified property or other assets under a specified mortgage or other security at the time of recovery. That is paragraph 102 of the 2025 Banking Code of Practice, read on 2 September 2026. It applies to subscribing banks on the loans the Code covers, and it does not follow that a non-bank or private facility will be limited the same way. Where a property is doing the work behind the guarantee, the mechanics of that sit in the guide to using property as security for a business loan.
| Type | What it covers | Who can be pursued | What limits it |
|---|---|---|---|
| Limited guarantee | A specific amount or category of amounts, or the value of a specified property or other assets under a specified security at the time of recovery | You, up to the stated limit | The limit written into the guarantee itself |
| Unlimited guarantee | Whatever the company owes the creditor under the guaranteed facility, without a ceiling written into the document | You, for the whole of the guaranteed liability | Only the terms of the facility and the general law |
| All obligations guarantee | Every present and future obligation the company owes that creditor, not only the facility in front of you | You, across facilities you may never have seen | Very little inside the document. This is the widest form in common use |
| Continuing guarantee | Liabilities that keep arising after you sign, including redraws, increases and new advances under the same arrangement | You, until the creditor releases you in writing | A written release, or a limit you ask for and the creditor accepts |
| Joint guarantee | The guaranteed liability, given by two or more guarantors together | The guarantors together, as one promise | The terms of the guarantee document |
| Joint and several guarantee | The guaranteed liability, given by two or more guarantors together and separately | Any one guarantor, for the whole amount, not a share of it | Nothing in the document divides the debt between you. Recovering a share from a co-guarantor is a separate question |
| Guarantee supported by your own security | The guaranteed liability, with a mortgage or other security you have given over your own asset standing behind it | You, and the asset you put up | The limit in the guarantee, and the enforcement sequence in Table 3 where a subscribing bank holds it |
Basis: the limitation and limit-request rows restate the 2025 Banking Code of Practice, paragraphs 102 and 116, read 2 September 2026. Qualifier: those paragraphs bind subscribing banks on the loans the Code covers. It does not follow that a non-bank or private facility is limited the same way. The remaining rows describe how these terms are ordinarily used in commercial guarantee documents and are general information, not advice on your document.
You can ask a subscribing bank to limit the guarantee, and it does not have to agree. Paragraph 116 of the same Code lets you write to the bank to limit, or further limit, the liabilities you have guaranteed. The bank does not have to accept if the limit you ask for would not cover the borrower's existing liability under the facility at the time, if it is obliged to make further advances to the borrower, or if it could not preserve the current value of an asset held as security without making further advances. Read 2 September 2026. Three stated grounds for refusal, which is not the same as a right to cap the guarantee on demand. It is still worth asking, in writing, and worth asking before you sign rather than after.
Scenario: you are asked to sign for an increase to the facility limit
The company is trading well and asks its lender to lift the facility limit. Documents come back and one of them is a fresh guarantee, or a variation to the one you signed years ago. This is the moment the exposure changes, and it is the moment most people treat as paperwork.
Two things are worth doing before you sign. First, read whether the document limits your liability to the new facility amount or whether it is drafted as an all obligations or continuing guarantee, because those two options are not close to each other. Second, if you want a limit, ask for it in writing before you sign, and understand that on a Code covered facility the bank can refuse on the three grounds above. Whatever is agreed has to be in the document. An assurance that the increase is only for one purpose is not a limit.
Your co-guarantor will not pay, or has gone bankrupt. Where does that leave you?
If the guarantee is joint and several, do not assume your exposure is only your percentage of the business. The creditor's rights depend on the guarantee wording, and one guarantor may be pursued for more than an informal 'share'. A solicitor should read the document before you assume the creditor must divide the claim evenly.
Australian law also recognises contribution between co-sureties in appropriate circumstances. In Lavin v Toppi [2015] HCA 4, the High Court dealt with contribution where co-sureties had shared coordinate liabilities and some had paid a disproportionate amount of the guaranteed debt. That is a claim between guarantors, not a release from the creditor, and its availability depends on the actual liabilities and facts. A co-guarantor's insolvency, a private agreement between directors, or one person's refusal to pay does not rewrite the creditor's guarantee document.
The practical point is about timing rather than law. Contribution is much easier to talk about before money moves than after, and informal arrangements between business partners tend to be tested at the worst possible moment. If you are relying on a co-guarantor to carry part of this, put the arrangement in front of a solicitor while everyone is still on speaking terms. Where the co-guarantor is a former spouse and the business assets are being divided, that has its own lane in divorce, property settlement and commercial assets.
What does a lender have to tell you before you sign, and what if you are the only director?
A subscribing bank has to give a guarantor a defined set of information and follow a defined process before it accepts the guarantee. If you are the sole director of the borrowing company, almost none of it applies to you. That is not a gap in the drafting. It is what the Code says, and it is the single most important thing on this page for anyone running a one director company.
Read the table below in one line: a sole director guarantor is carved out of eight of the nine protections, a plain director guarantor loses the pre-signing meeting outright and may sign before the third day wait has run, and everyone else gets all nine. The 2025 Banking Code of Practice carves a Sole Director Guarantor out of paragraphs 104, 105, 107, 114, 115 and 117, out of the pre-signing meeting requirement in paragraph 111, and out of the third day wait in paragraph 113. Each of those carve-outs also covers a Commercial Asset Financing Guarantor, a Trustee Guarantor and a Partnership Guarantor. The practical effect is that a one director company's director receives almost none of the Code's disclosure and process protections. Read at the Association's published Code on 2 September 2026.
| Protection | Ordinary guarantor | Director guarantor | Sole director guarantor |
|---|---|---|---|
| Warning notice above the signature (para 103) | Applies | Applies | Applies |
| The borrower's demand history (para 104) | Applies | Applies | Does not apply |
| Loan, security and borrower financials (para 105) | Applies | Applies | Does not apply |
| Documents given to you, not via the borrower (para 107) | Applies | Applies | Does not apply |
| A meeting without the borrower present (paras 109, 110) | Applies | Does not apply | Does not apply |
| A wait until the third day after disclosure (para 112) | Applies | Applies, but you may choose to sign earlier | Does not apply |
| Signing in the borrower's absence (para 114) | Applies | Applies | Does not apply |
| Notice of the borrower's deteriorating position (para 115) | Applies | Applies | Does not apply |
| Copies of your guarantee information on request (para 117) | Applies | Applies | Does not apply |
Detail behind the short labels. Paragraph 103 is a prominent warning in the guarantee terms and a warning directly above where you sign. Paragraph 104 covers any demand made on the borrower in the two years before, and whether an existing loan is cancelled if you do not sign. Paragraph 105 covers the proposed loan contract, the related security list, the borrower's credit report and recent financial information. Paragraph 110 adds that where the meeting is by video the borrower will not be visible on screen. Paragraph 115 runs within 14 days of the event, including any default notice. Paragraph 117 runs within 30 days of your request. Source note. The 2025 Banking Code of Practice is owned by the Australian Banking Association. It was approved by the corporate regulator on 27 June 2024 and took effect on 28 February 2025, replacing the 2019 Code. The paragraph numbers changed, so any source citing the older numbering is out of date. Every paragraph in this table was read at the Association's own published Code on 2 September 2026. Qualifier: the Code binds subscribing banks only, and only on the loans it covers. It is what those banks have committed to do. It is not a statement that every lender does the same, and none of it removes your rights under the general law.
Two of those rows are new in the 2025 Code and worth naming. Before accepting a guarantee, a subscribing bank will take reasonable steps to ensure a meeting is held with the guarantor, and that the borrower is not present, including not visible on screen if the meeting is by video. That is paragraphs 109 and 110, read 2 September 2026. The exclusions in paragraph 111 apply, and they cover every director guarantor category, which is why the middle column of that row reads the way it does. Separately, the bank will not accept a guarantee until the third day after the paragraph 103 to 105 information has been given, under paragraph 112, with the exceptions in paragraph 113 including independent legal advice and the guarantor categories above.
Scenario: a sole director on an all obligations guarantee
A one director company holds a facility supported by an all obligations guarantee. Nobody sat the director down without the borrower in the room, because the borrower and the guarantor are the same person and the Code does not require it. No demand history was disclosed, no financial information about the borrower was handed over and no third day wait ran, because each of those paragraphs carves the sole director out. Everything about that is consistent with the Code.
Where it becomes a live problem is later, when the director wants to move the facility to a structure secured on property. The all obligations wording means the guarantee is not tied to the one facility being refinanced, so paying that facility out does not end it. The release has to be asked for and written, separately and explicitly. This is the case that most often surprises people, and it is the reason the release section below insists on the words in writing.
Does resigning, selling the company or liquidation end the guarantee?
No. None of the three ends it on its own. Resigning as a director is precisely what does not end a director's guarantee, and that is the most common wrong belief on this whole topic. You gave the guarantee personally, not in your capacity as a director, so ceasing to hold the office changes nothing about the contract you signed. Selling your shares changes the ownership of the company and leaves your promise to the creditor exactly where it was.
Liquidation is the one people are most confident about and it is no different. Winding the company up deals with the company's obligations to its creditors. Your guarantee is a separate contract, and if anything liquidation is when a creditor turns to it, because the company can no longer pay. Deregistration is the same answer for the same reason: the company ends, the promise does not. If a winding up application has already been filed against the company, the timing questions that follow are dealt with in what to do when a winding up application is filed. If the company is heading into a deed of company arrangement instead, the finance side of that sits in the deed of company arrangement finance guide.
What liquidation and bankruptcy actually resolve
Liquidation resolves the company's obligation to its creditors, and nothing of yours
If you do not become bankrupt, the company's liquidation only resolves the company's obligation to its creditors. It does not resolve your separate personal debts or guarantees, and you will need to pay these.
Source: Australian Financial Security Authority, prepared jointly with the corporate regulator and the insolvency and turnaround association, on personal bankruptcy and the liquidation of a company. Read: 2 September 2026. Qualifier: the page is general information and carries its own direction to seek independent professional advice for your circumstances.
Bankruptcy ends your directorship and takes your shares with it
If you become bankrupt, you cannot continue as a company director. Any shares you own in the company pass to, or vest in, your trustee in bankruptcy.
Source: the same joint publication. Read: 2 September 2026. Qualifier: this is a consequence of bankruptcy itself, not of the guarantee. Bankruptcy is a serious step with effects well beyond a company debt and it is a matter for a solicitor or a registered practitioner, not for a broker.
Read the two rows together. Winding the company up does not reach your guarantee, and the step that would reach it costs you the directorship you were trying to protect.
There is one narrow exception on timing rather than on liability, and it is voluntary administration rather than liquidation. It pauses enforcement against a director in some circumstances and it does not release anyone. That is dealt with in the enforcement section directly below.
If none of these three ends it, what does? Only the routes in the release section further down this page: a written release from the creditor, a substitution the creditor accepts, repaying or refinancing the guaranteed liability away, or, rarely and only on legal advice, a challenge to the guarantee itself. Everything else is a change to the company. The guarantee is a change to you.
Are director guarantees enforceable, and does the lender have to chase the company first?
Yes, director guarantees are enforceable. They are ordinary contracts, they are drafted by people who enforce them, and Australian courts enforce them. Everything on this page describes Australian law and Australian market practice, which is worth saying because guarantee and contribution material written for the United Kingdom, New Zealand and Canada reads almost identically and does not apply here. Whether the creditor has to chase the company first depends on who the creditor is: a subscribing bank has committed to an enforcement sequence under the Banking Code, and a lender outside the Code has not. Nothing on this page can tell you how likely enforcement is in your case, and any page that offers to is guessing.
What a demand under a guarantee looks like in practice, and what to do in the days after one arrives, is covered in what happens when a personal guarantee is called, and the section directly below this one sets out the first moves. If the pressure is on the company rather than on you personally, a statutory demand against the company is a different instrument with its own clock, and it is worth knowing which one you are actually holding.
What a subscribing bank must do first, and how much law sits behind a commercial guarantee
The borrower's security is enforced first, and a judgment against you waits on one of three things
A subscribing bank will not enforce a mortgage or other security you gave in connection with the guarantee unless it has first enforced any security the borrower provided for the guaranteed liability. It will not enforce a judgment against you under the guarantee unless it has first enforced the borrower's security and one of three things has happened: it holds a court judgment against the borrower that remains unpaid at least 30 days after written demand, it has made reasonable attempts to locate the borrower without success, or the borrower is insolvent.
Source: 2025 Banking Code of Practice, paragraphs 124 and 125. Read: 2 September 2026. Qualifier: paragraph 126 sets two carve-outs, including where you have specifically agreed in writing that the restrictions do not apply after a default notice is issued, and where the bank reasonably expects the borrower's security will not cover a substantial part of the liability. The Code binds subscribing banks only.
There is no unsuitability test on a small business loan
Lending to a small business is not part of the responsible lending obligations under the National Consumer Credit Protection Act. The financial complaints ombudsman does not apply those provisions, the National Credit Code or the associated regulatory guide when it assesses a small business loan complaint, so there is no test of unsuitability and the lender is not required to make the same level of enquiries as it would for consumer lending.
Source: Australian Financial Complaints Authority, small business page. Read: 2 September 2026. Qualifier: this is how the ombudsman approaches these complaints. It is not a statement that no protections exist. Read it beside the next row.
The prohibitions still stand, and the bar is high
The low level of legal protection on commercial loans limits the corporate regulator's ability to act against lenders on commercial loans. The governing Act still prohibits unconscionable conduct, misleading or deceptive conduct, and unfair contract terms in standard form small business contracts. On commercial loans the courts generally impose a high bar when a borrower alleges that a lender or broker has acted unconscionably, judging it in light of the business nature of the transaction.
Source: corporate regulator Information Sheet 207, on disputes about commercial loans. Read: 2 September 2026. Qualifier: information sheet guidance, not legal advice. Any specific dispute is a matter for a solicitor.
None of these rows says whether a guarantee will or will not be enforced in your case, and nothing on this page can. They describe the process a subscribing bank has committed to and the law that sits behind a commercial guarantee.
Guarantee enforcement during administration
There is a statutory pause, and it is narrow. During the administration of a company, a guarantee of a liability of the company cannot be enforced against a director of the company who is a natural person, or against a spouse or relative of such a director, and no proceeding in relation to such a guarantee can be begun against them, except with the leave of the Court and on the terms the Court imposes. That is section 440J of the Corporations Act 2001 (Cth), read at the Australasian Legal Information Institute on 2 September 2026.
Read the word pause carefully. It is a pause during administration, not a release. The guarantee survives the administration, and when the administration ends the protection ends with it. It also needs the company to actually be in administration, which is a formal appointment and not a state of affairs you can describe your way into. Whether an administration is the right step for a company is a question for a registered practitioner and a solicitor, not a financing decision, and it should never be entered into for the purpose of buying a director time on a guarantee.
One detail in that section is worth pulling out because it catches people who are not directors at all. The pause extends to a spouse or relative of a natural person director. If your partner signed a guarantee, or their property is standing behind the company's borrowing, they are inside this provision even though they never held the office. What they are exposed to more broadly is set out in using someone else's property as security.
A demand has arrived under your guarantee. What happens now?
What happens now is that the creditor is asking you to pay the company's debt personally, and the first move is to get the documents and get advice before you reply. Almost nothing about the days after a demand is a finance question. It is a legal question with a finance question sitting behind it, and the order you do things in changes your position more than the words you use in the reply.
A demand is not a judgment. It is a request for payment under the guarantee, and it is the step before proceedings rather than the end of them. It is also not the same instrument as a statutory demand served on the company, which runs to its own timetable and is dealt with in the statutory demand guide. Establishing which document you are holding, who sent it and under which guarantee is the first thing a solicitor will do, and it is worth doing before you respond to anything.
Where the creditor is a subscribing bank, the sequence set out above applies before it enforces: the borrower's security is enforced first, and a judgment against you waits on a judgment against the borrower unpaid at least 30 days after written demand, an unsuccessful attempt to locate the borrower, or the borrower's insolvency. Paragraphs 124 and 125, read 2 September 2026. A non-bank or private lender has made no such commitment, so the first question is always which kind of creditor this is.
| Move | Why it matters | Who does it |
|---|---|---|
| Get the guarantee document and the demand side by side | The demand tells you what is claimed. The guarantee tells you what you actually promised, whether it is limited, and whether it is the guarantee the creditor thinks it is | You, using the routes in the section above if you do not hold a copy |
| Establish who the creditor is and whether the Code reaches them | A subscribing bank has committed to an enforcement sequence. A non-bank or private lender has not, and that changes what to expect next | You can check this. What it means for your position is for a solicitor |
| Get legal advice before you reply | What you say, acknowledge or offer in the first exchange can matter later. This is the step people skip because a reply feels urgent and advice feels slow | A solicitor |
| Do not pay the debt out of company funds without advice first | Where the company is insolvent or near it, moving company money to settle a debt you have personally guaranteed can create separate problems for a director. That is a question to ask before, not after | A solicitor, or a registered insolvency practitioner |
| Do not sign a repayment arrangement before advice | An arrangement can settle questions you had not yet asked, including whether the amount claimed is right and whether the guarantee covers it | A solicitor |
| Do not ignore it | Nothing about a guarantee improves with time. The routes that exist while a creditor still wants something from you close once proceedings are on foot | You |
| Work out separately whether a refinance can clear the guaranteed liability | If the liability can be paid out, the guarantee has nothing left to answer for. Whether that is available depends on the security and the timeframe, and it runs in parallel with the legal work rather than instead of it | A finance broker, alongside the solicitor |
Qualifier: general information, and practitioner-framed rather than sourced. It states no timeframe, no clock and no amount, because those depend on the document, the creditor and the jurisdiction. It is not legal advice and it is not a substitute for taking the demand and the guarantee to a solicitor. Where the personal position has become unmanageable, financial counselling is a free service and is the right call before the position gets worse.
The words on the paperwork tell you where in the sequence you are. A demand under the guarantee, court judgment, bankruptcy notice, creditor's petition and sequestration order are different instruments. The table below gives a verified timeframe only for the bankruptcy-notice row because AFSA publishes that period directly; do not borrow that 21-day period for an ordinary guarantee demand or for a company statutory demand.
| Instrument | What it is | Who it is aimed at | Who to ask about it |
|---|---|---|---|
| Letter of demand under the guarantee | A written request that you pay the guaranteed liability personally. It is a step before proceedings, not a court document | You, as guarantor | A solicitor, before you reply |
| Statutory demand | A demand served on a company in relation to a company debt. It is a different instrument on a different track and it is not aimed at you personally | The company | A solicitor. The separate guide on this site covers it |
| Court proceedings and judgment | The creditor sues on the guarantee and, if successful, obtains a judgment debt against you | You, personally | A solicitor |
| Bankruptcy notice | A formal notice issued in respect of a judgment debt. AFSA says a person generally has 21 days from service to comply, although the period can differ and the notice itself must be checked. | You, personally | A solicitor, urgently. See AFSA guidance for people served with a bankruptcy notice. |
| Creditor's petition | An application to the court asking that you be made bankrupt | You, personally | A solicitor |
| Sequestration order | The court order that makes you bankrupt, at which point a trustee is appointed and your directorship ends | You, personally | A solicitor and a registered trustee |
| Personal insolvency agreement or debt agreement | Formal alternatives to bankruptcy under the personal insolvency system, each with its own eligibility rules and consequences | You, as an alternative route | A registered trustee or administrator, and a financial counsellor. Financial counselling is free |
Qualifier: the 21-day statement applies to a bankruptcy notice and is sourced to AFSA, read 3 September 2026. AFSA says the timeframe can differ, so the notice must be read carefully. No deadline is stated here for an ordinary guarantee demand, a company statutory demand, court proceedings, a creditor's petition or any other instrument. Those require advice on the actual document.
The finance question that does belong here is narrow and worth naming plainly. If the guaranteed liability can be refinanced or paid out, the guarantee has nothing left to answer for, which is the third of the four release routes below. Whether that is achievable after a demand depends on what security exists and on how much time there is, and it is materially harder than it would have been three months earlier. If a judgment has already been entered, the options narrow again and are dealt with in refinancing with a court judgment.
How can you end your liability under a director's guarantee?
There are four practical routes that can end liability under a director's guarantee:
- A formal written release from the creditor. The creditor signs a release, usually a deed or other written release, that identifies the guarantee and ends your liability under it.
- A replacement guarantor or substitute arrangement the creditor accepts. The incoming person or structure is accepted and your release is documented at the same time.
- Repaying or refinancing the guaranteed liability. The debt the guarantee answers for is fully extinguished, but you must check whether continuing or all-obligations wording leaves any other covered liability behind.
- A successful legal challenge to the guarantee. Rare, fact specific and a solicitor-only route. This page does not tell you whether your guarantee can be challenged.
Resigning, selling shares, changing directors, winding up the company and waiting are not, by themselves, any of those four routes.
A formal creditor release is only one way liability can end, but if you are relying on a negotiated release, get it in writing from the creditor. Nothing agreed only between the company, the buyer, the outgoing director and the incoming director binds the creditor. A sale contract saying the buyer assumes the debt is not the creditor's release. A buyer's indemnity can shift the economic risk between you and the buyer if it is drafted and enforceable, but it does not remove the creditor's rights against you under the guarantee. A board minute is not the creditor's release. An accountant's email is not the creditor's release.
| Route | What has to happen | Who has to agree | What it does not do |
|---|---|---|---|
| A formal written release | The creditor signs a release, usually a deed, that names your guarantee and ends your liability under it | The creditor. Nobody else | It does not touch any other guarantee you have signed, to that creditor or anyone else |
| Substituting an incoming director or a replacement guarantor | Someone the creditor is prepared to accept signs in your place, and the creditor releases you in writing at the same time | The creditor, the incoming guarantor and you | An agreement between you, the company and the incoming director does not bind the creditor and does not release you |
| Repaying or refinancing the guaranteed facility | The guaranteed liability is paid out in full so there is nothing left for that guarantee to answer for, subject to the guarantee wording. | The payout must actually extinguish the covered liability. A new lender may be involved in a refinance, but the new lender does not release the old guarantee. | It does not necessarily end a continuing or all-obligations guarantee if other covered liabilities remain with the same creditor. |
| Challenging the guarantee itself | A solicitor advises on whether the guarantee can be set aside or resisted on the facts of your case, and acts if it can | A court, or the creditor once advised | It is rare, it is fact specific and it is not a planning step. This route exists and it is a matter for a solicitor, not for this page |
Basis: the paying and other-arrangements route restates the 2025 Banking Code of Practice, paragraph 123, read 2 September 2026. Qualifier: paragraph 123 applies to subscribing banks and to the loans the Code covers. A non-bank or private lender is not bound by it, so on those facilities every route above is a matter of what the creditor will agree to. Nothing here is advice on your guarantee.
On a Code covered facility there is a stated mechanism behind the first and third routes. Paragraph 123 of the 2025 Banking Code of Practice says a guarantor may end their liability by paying the lower of the borrower's outstanding liability, including any future or contingent liability, or the amount to which the guarantee is limited, or by making other arrangements the bank agrees to in return for releasing the guarantor. Read 2 September 2026. It applies only to subscribing banks and to the loans the Code covers, and non-bank and private lenders are not bound by it.
Two practical complications come up often enough to name. If your security is tangled with other facilities, the release conversation is really an untangling conversation first, and that is dealt with in getting off cross-collateralisation. If someone else's property is standing behind the facility, the release affects them too. Where a guarantee is being unwound as part of a separation, the commercial assets question is its own problem and it is covered in divorce, property settlement and commercial assets.
On the fourth route, this page names it and stops. Whether a guarantee can be challenged depends entirely on the facts, the doctrine involved is not straightforward, and a page like this is the wrong place to learn it. If you think there is something wrong with how your guarantee was obtained, take the document and the circumstances to a solicitor.
The creditor says you are released. How do you prove the job is actually finished?
Finish the paperwork, not just the conversation. Keep the creditor's signed release or deed and make sure it identifies the correct guarantor, borrowing entity and guarantee or facility. If the guarantee was supported by a mortgage or other security over your asset, confirm separately whether that security also has to be discharged. A guarantee release and a security discharge are related but they are not the same document.
- Match the names. Your name, the borrower and the creditor should be the parties you expect.
- Match the guarantee. The release should identify the guarantee or the obligations being released clearly enough that you are not left arguing later about which document it covered.
- Check all-obligations wording. Ask whether any other facility, card, overdraft, lease, trade account or future or contingent amount remains covered.
- Check supporting security separately. If land was mortgaged, confirm the mortgage discharge. If a GSA or other personal-property security interest is meant to end, confirm separately whether the secured party must end or amend its PPSR registration. A guarantee release, a mortgage discharge and the ending of a PPSR registration are three different pieces of the cleanup.
- Keep the evidence permanently. Save the signed release, payout or closure confirmation and any security discharge with your guarantee register. The value of the document is greatest years later, when nobody involved remembers the file.
Do not use a zero balance as your only evidence. Revolving facilities can be redrawn, continuing guarantees can cover later liabilities and all-obligations wording can reach beyond the facility you just paid out. The signed documents decide whether you are finished.
What will an Australian lender actually assess before agreeing to release you?
There is no universal public scorecard for releasing a director's guarantee. In practice, the lender is deciding whether the facility is still acceptable without your covenant, so it usually re-assesses what remains: the borrower's current cash flow and financial position, the strength of any remaining or replacement guarantor, the security still available, the facility balance and limit, repayment conduct, and whether the release is happening alongside a refinance, debt reduction or security substitution. Those are credit-policy considerations rather than a promise that any lender will release you.
What strengthens the request? Current financials that support the debt without you, a credible replacement guarantor, lower debt, stronger security, clean conduct and a live transaction the lender is already assessing. What weakens it? Deteriorating trading, arrears, a highly drawn facility, loss of security, or asking the lender to give up your covenant while receiving nothing in return. For a subscribing bank, the Banking Code gives specific rights around limiting and ending liability, but it does not create a general right to be released simply because you resign or ask.
What if you ask for a release and the lender says no?
A refusal now is not a refusal forever, because what the lender is weighing changes every time the facility changes. The question to ask next is not whether to ask again but what has to be different before the answer can be different, and there are usually four things worth trying in order.
Ask for a limit instead of a release. On a Code covered facility, paragraph 116 lets you write to a subscribing bank to limit, or further limit, the liabilities you have guaranteed, and the bank can refuse only on the three stated grounds set out earlier. A capped exposure is not what you wanted, but it is a materially different position from an open one, and a request that fails as a release sometimes succeeds as a limit.
Offer something in its place. The refusals that come back fastest are the ones where nothing was offered. A replacement guarantor of equal or better quality, a stronger security position, or a reduction in the facility all give the lender a reason to engage that a clean repayment history does not.
Wait for the next credit event and ask then. A lender considers your position properly when it is already making a decision, so an annual review, a limit increase, a security substitution or a refinance is a live moment and an ordinary Tuesday is not.
Refinance the covered liability away instead. If the facility can be paid out in full, that can remove the liability the guarantee answers for. But do not treat payout as a universal release: a continuing or all-obligations guarantee may still cover other present, future or contingent liabilities. Have the wording checked and get written closure or release evidence for the position you are relying on.
Whatever the answer, get the request and the refusal in writing and keep them dated. It costs nothing, it establishes when you asked, and it is the record you will want if the position is ever reviewed by anyone else.
When is the right moment to ask for a release, and what leverage do you have?
The right moment is whenever the creditor still needs something from you, which in practice means before you sign, at any increase or refinance, and as a condition of settlement when you sell. After settlement you have nothing left to trade, and that single fact explains most failed release requests. The request itself is not what changes: the leverage behind it is.
This is the part of the topic that gets written about least and matters most. The same release request can be commercially stronger or weaker depending on when it is made because the creditor's decision is tied to the facility event in front of it. The useful question is not how persuasive the letter sounds. It is what the creditor is being asked to approve at the same time, and what it receives in return.
| Moment | What you can ask for | What leverage you have | What waiting costs you |
|---|---|---|---|
| Before you sign the guarantee | A limit, a facility-specific rather than all obligations definition, or no guarantee at all if something else can carry the risk | The most you will ever have. The lender wants the deal and nothing has been signed | Everything below becomes harder, and the wording you accepted becomes the wording you have to negotiate out of |
| When the facility limit is increased | A limit on the guarantee, or a narrowing of all obligations wording, as part of the increase | Real. The lender is asking you to sign something, so it is a negotiation rather than a request | You sign the increase and the exposure widens without the question being asked |
| When you refinance to another lender | A written release from the outgoing lender, dealt with as a condition of settlement | Strong, but only until the money moves. The outgoing lender is about to be paid out and still has to sign things | This is the most commonly missed moment on the whole page. Ask after settlement and there is nothing in it for the lender |
| When you sell the business or your shares | Release written into the transaction as a condition precedent, with a substitute guarantor named | Strong, because the buyer needs the facility and the lender needs a guarantor | You sell, the buyer takes over, and you remain the guarantor of a business you no longer control |
| At an annual review or security substitution | A release or a limit, on the back of whatever has improved since the guarantee was given | Moderate. The lender is already assessing, so the request lands on an open file rather than a closed one | Little, if you ask at every review. This is the low cost habit rather than the decisive moment |
| After settlement has happened | A release, on goodwill | Very little. The lender has been paid or has what it wanted, and the request joins a queue | This is the cost. The request that would have been a condition of settlement is now a favour |
| After a demand has been made | Not a release. A negotiated position, on legal advice | Whatever your actual position gives you, which is a legal question rather than a negotiating one | The release conversation is over. See the demand section above |
Qualifier: practitioner-framed general information, drawn from how release requests are ordinarily dealt with on refinance and sale transactions. It states no probability, no timeframe and no figure, and it does not predict what any lender will do on your facility. Whether a release is achievable depends on the creditor, the security and your circumstances at the time.
One practical consequence is worth spelling out for anyone mid-transaction. If a release matters to you, it belongs in the instructions to your solicitor and in the term sheet, not on a list of things to sort out afterwards. Once it is written in as something that has to happen for the deal to settle, everybody involved has a reason to make it happen. Left off, it becomes a task nobody owns, on a file that has closed.
Can you insure a personal guarantee in Australia?
Yes. Personal guarantee insurance is available in Australia through specialist providers, but it does not release the guarantee. An Australian specialist currently describes the product as an annual policy intended to respond when a lender formally calls a covered personal guarantee, subject to individual underwriting and the policy wording. That establishes Australian availability. It does not establish that every guarantee is insurable or that a particular call will be covered.
Do not confuse it with directors and officers insurance. They are different products aimed at different exposures. A personal guarantee is a contractual promise to answer for company debt. Directors and officers cover is about claims arising from conduct in the role. If you have either policy, read the wording and ask the insurance broker who placed it rather than assuming one covers the other.
| Question | Personal guarantee insurance | Directors and officers insurance |
|---|---|---|
| What it is designed to respond to | A call on a personal guarantee you gave for a company debt | Claims arising from how you performed the role of director or officer |
| What sits behind the exposure | A contract you signed voluntarily, promising to pay someone else's debt | Allegations about conduct, decisions and duties |
| Does it end the guarantee | No. A policy may respond to a covered call, but it does not itself release you or extinguish the guaranteed liability. | No, and it was never aimed at the guarantee in the first place |
| Australian availability | Available through at least one Australian specialist; underwriting and policy wording determine availability for a particular guarantee | Established Australian insurance class, but not a substitute for personal guarantee insurance |
| Who to ask | An insurance broker, and your solicitor on how it interacts with the guarantee wording | The broker who placed the policy, and your solicitor |
Qualifier: this table distinguishes the products structurally. It states no premium, percentage of cover or exclusion list. Australian personal guarantee insurance availability was checked at product level on 3 September 2026; whether a policy responds depends on its underwriting and wording. Switchboard does not arrange or advise on insurance.
Two things to hold on to before treating insurance as a plan. Read what is excluded, because cover of this kind ordinarily responds to a defined set of circumstances rather than to any call on the guarantee at all, and the exclusions are where the product either works for you or does not. And treat it as a complement to a release rather than a substitute for one: a release ends the liability, a policy at best funds part of it and leaves the guarantee standing. If you can get released, get released.
Which Australian business finance actually requires a director's guarantee?
Many small-company business finance facilities ask directors for a personal guarantee, but it is not universal and product labels do not decide the answer on their own. The requirement turns on the lender, the borrowing entity, the strength of the business and the security or asset already supporting the facility. The practical question is not 'does this product always need a guarantee?' but 'what does this lender require on this borrower and this security?'
A warning about what you will find searching this question. Look for business finance with no personal guarantee and most of what comes back is written for the United States, where corporate cards issued against a company's own credit file are an established product and the vocabulary around building business credit separately from personal credit does not describe how Australian lending works. It is not that the Australian answer is different in detail. It is that the American answer describes a market that does not exist here in that form.
| Facility | Is a director's guarantee usual on a small company | What can carry the risk instead | What to ask before you assume |
|---|---|---|---|
| Business loan or overdraft, unsecured | Almost always | Little. There is no security, so the covenant is the lender's position | Whether a limit can be written in, and whether the guarantee is facility-specific or all obligations |
| Business or corporate credit card | Usually | The company's own financial strength, where it is large enough for the issuer to lend against it | Whether the card is issued against the company or against you, and what the application form actually says you are signing |
| Equipment finance and chattel mortgage | Often, and it varies | The asset itself, registered as security. The stronger the asset and the shorter the term, the more room there is | Whether the covenant can come off where the asset is standard, saleable and the term is short |
| Invoice and debtor finance | Often, in a narrower form | The receivables themselves, and the quality of the debtor book behind them | Whether what is being asked for is a full guarantee or a narrower warranty about the invoices |
| Trade finance | Usually | The goods and the underlying transaction, where the structure allows the financier to hold them | What the financier holds between payment and delivery, and whether that reduces what it needs from you |
| Commercial property loan | Commonly, and it is the most negotiable | The property, and how much room sits inside it | Whether a more conservative position against the property buys the covenant back |
| Commercial lease | Almost always, from the landlord | A bank guarantee or security deposit, which the landlord may still take alongside your personal guarantee rather than instead of it | Whether the bank guarantee replaces the personal guarantee or sits on top of it |
Qualifier: this table describes general market practice by facility type on a small private company. It states no rate, no ratio, no limit, no turnover threshold and no policy, because whether a covenant is required is decided by the individual lender against your business at the time you apply. Practice differs between banks, non-bank lenders and private lenders, and none of it is a statement about what any particular financier will do. General information only.
The pattern underneath the table is worth stating on its own. Where a facility has a strong, identifiable, saleable asset behind it, there is room to negotiate the covenant. Where it does not, there usually is not, and asking is still free. What a lender will take in place of your covenant is the subject of the section below.
Does releasing the bank's guarantee release the landlord's?
No. Each guarantee is a separate contract, with a separate counterparty and its own release conditions. Getting the lender to release you does not touch the guarantee you gave the landlord, the one on the trade credit application, or the one inside the franchise agreement. They were never connected, and nothing you do with one changes any of the others.
This section sits directly after the release sections for a reason. A reader who has just worked out how to get out of the bank's guarantee will reasonably assume the rest went with it. They did not, and the ones people forget are usually the oldest: a trade credit application signed on a single page years ago, or a lease guarantee given when the company took its first premises.
| Who holds it | What it secures | What ends it | Who you ask |
|---|---|---|---|
| The lender | The company's loan, overdraft, equipment facility or line of credit | One of the four routes in Table 6, in writing from that lender | The lender, through your broker |
| The landlord | The company's obligations under the commercial lease, which usually run for the whole term and beyond the day you stop being a director | A written release from the landlord, or the lease itself coming to an end on its terms | The landlord, on your solicitor's advice |
| A trade credit supplier | The company's trading account with that supplier, often signed years earlier on a one page credit application | A written release from that supplier, and closing the account does not do it by itself | The supplier, in writing |
| The franchisor | The company's obligations under the franchise agreement | A written release from the franchisor, usually dealt with on transfer of the franchise | The franchisor, on your solicitor's advice |
Qualifier: this table sets out who holds each guarantee and who can end it. It does not interpret your lease, your supply terms or your franchise agreement, and it does not state what any of those documents typically require. Those are matters for a solicitor.
Before you start any release process, build the guarantee register described earlier. Include lender facilities, leases, supplier and trade accounts, franchise or licence agreements and any guarantee supported by property. For each one, identify the creditor and the exact document that must be released. This is how you avoid solving the bank guarantee and discovering six months later that the lease or supplier guarantee survived untouched.
Two of these have their own lane in the estate. If the release conversation is happening because you are buying the premises rather than continuing to lease them, that changes the landlord question entirely and it is dealt with in buying your premises from your landlord. If a supplier has already moved you to cash on delivery, the trade credit guarantee is usually part of that conversation, and what to do when a supplier cuts your credit terms covers the funding side.
What this page will not do is interpret your lease. Whether a particular lease guarantee ends on assignment, what happens to make-good, and what your outgoings obligations are, are all questions about a specific document. Take the lease to a solicitor. The point here is narrower and it holds regardless of what your lease says: the landlord's guarantee is the landlord's to release, and only the landlord can do it.
Can refinancing get you out of a personal guarantee, and what might the new lender require?
Refinancing can end exposure under the old guarantee if the refinance fully extinguishes the liability that guarantee covers and no continuing or all-obligations liability remains. Whether the new lender asks you to sign a new guarantee is a separate question. A refinance can therefore remove one guarantee and create another, or remove the old guarantee without a new personal covenant where the incoming structure carries the risk another way.
Treat the transaction as two separate tests. Test one: what must happen for the old guarantee to stop answering for debt? That is a document, payout and release question. Test two: what security or covenant does the incoming lender require? That is the finance-structure question a broker can help with. Do not let the second question obscure the first. At settlement, also keep the security cleanup separate: a payout figure, a creditor's release of your guarantee, a land-mortgage discharge and the ending of a PPSR registration are not interchangeable documents.
| Replacement | What it commits | What you give up | When it is available |
|---|---|---|---|
| Property security | A specific property, held as security for the facility, instead of an open promise from you personally | The flexibility of that property. It is committed, it cannot be sold or refinanced freely, and it can be cross linked to other facilities if you let it | Where the company or a related entity holds property with room in it, and the lender is comfortable taking it |
| A corporate guarantee from a related entity | Another company in the group answers for the debt in your place | The related entity's balance sheet is now exposed, which can restrict what it can borrow for itself | Where a related entity has real substance. An empty entity adds nothing and lenders treat it that way |
| A general security agreement over business assets | A general security agreement is a registered security interest over the company's assets as a whole, present and future, rather than one named item. It commits the trading assets of the business | Freedom to deal with those assets, and the ability to offer them to another financier while the agreement stands | Where the business holds real assets, debtors or stock a lender can identify and value |
| A more conservative lending position against the security | Less debt is written against the same security, so the lender's exposure sits further inside the asset | Cash, or borrowing capacity. You fund the difference from somewhere | Where you have equity or funds available to reduce the facility as part of the move |
| A facility type that does not ask for the covenant | The structure itself carries the risk, because the security or the underlying asset does the work | Usually flexibility, and often price. A structure that does not need your covenant is rarely the cheapest one on the table | Genuinely limited, and it depends entirely on the asset and the lender. It is worth asking and it is not worth assuming |
Qualifier: this table describes the shape of the substitutions lenders consider. It states no rate, no ratio, no limit, no fee and no timeframe, because none of those can be set without a lender, a security and your circumstances in front of them. Availability is a matter for the individual lender's policy at the time you apply. General information only.
One of those terms needs defining because the estate has no glossary node for it yet. A general security agreement is a registered security interest taken over business assets as a whole, present and future, rather than over one named item. It reaches company assets rather than becoming a promise from you personally. Whether a lender treats it as enough without a director guarantee depends on the asset pool, facility and lender policy.
What the structure looks like depends on what the business has. Where the paperwork is the constraint rather than the security, low doc business lending is often the shape the refinance takes. Where a commercial property is the asset doing the work and the tenant is paying the loan, a lease doc commercial property loan is a structure worth understanding. Where the real problem is that the covenant is spread across four facilities with three creditors, consolidating the business debt is usually the first move, because you cannot negotiate a release on a mess. And where there is equity available but the first mortgagee will not move, a second mortgage sometimes does the work, with the trade-offs that come with it.
Scenario: two directors, one exiting
A company has two directors and both have guaranteed the facility. One is leaving. The exit is agreed between them, the accountant has the share transfer in hand, and the assumption on both sides is that the outgoing director's guarantee leaves with the shares. It does not.
The version of this that works puts the release into the new facility as a condition of settlement. The incoming structure is negotiated with the outgoing director's release written in as something that has to happen for the deal to settle, so the outgoing lender is dealing with the release at the same moment it is being paid out and it still has a reason to engage. The version that fails signs everything, settles, and then asks. By then the outgoing director has nothing to trade and the request goes into a queue nobody is working.
From our broking, indicative
Release requests are a regular part of refinance work, and the pattern in what succeeds is consistent enough to be worth stating plainly.
- Release negotiations are strongest when the outgoing creditor can see that its risk is being removed or replaced: for example through payout, an accepted replacement guarantor, stronger security or another arrangement it agrees to. Clean conduct helps the conversation but does not itself create a right to release.
- A request with no change to the creditor's risk position is harder to support commercially. If a release is refused, ask what would need to change: limit, security, facility size, incoming guarantor or full payout.
- Sequence the release before settlement. Put the required release and any security discharge into the transaction checklist so they are dealt with while the payout, refinance or sale is still being completed.
Indicative only, drawn from files we have placed. It is not a quote, not an offer, and not a prediction about your guarantee. No figure, band, rate or timeframe is stated here because none can be, and any release depends on the creditor, the facility and your circumstances at the time. General information only, not financial or legal advice.
Where can you get help, and what can a complaint actually do?
Start with the right professional, then decide whether a complaint is worth making. A solicitor deals with the guarantee terms, the lease terms, your position against co-guarantors and any question of challenging a guarantee. A registered insolvency practitioner deals with a company that cannot pay. An accountant deals with entity structure and the tax treatment of a director's loan. A financial counsellor, which is a free service, deals with a personal position that has become unmanageable. A finance broker deals with the part this page is actually about: what an incoming lender will take in place of your covenant.
On the complaint question, you can complain to the financial complaints ombudsman about a small business credit facility, and it is worth being honest about the limits before you start. The ombudsman defines a small business as an organisation with fewer than 100 employees. It cannot consider a complaint about a small business credit facility that exceeds $6.3 million, for complaints lodged on or after 1 January 2024, and it says a credit facility may include a loan, lease, line of credit, guarantee or other debt instrument. The threshold figure and its effective date travel together, and complaints lodged before that date use the limit in the version of the Rules current at the time. Read at the ombudsman's own small business page on 2 September 2026.
That exclusion applies to you as a guarantor, not just to the borrower. The ombudsman says the exclusion of small business credit facilities over that threshold applies whether the complainant is the borrower or a guarantor of the credit facility. If the company's facility is above the line, being the guarantor rather than the borrower does not get you back inside the ombudsman's jurisdiction.
Two further limits are worth knowing before you invest time in a complaint. Lending to a small business is not part of the responsible lending obligations under the National Consumer Credit Protection Act, so the ombudsman does not apply those provisions, the National Credit Code or the associated regulatory guide when it assesses a small business loan complaint, and there is no test of unsuitability for a small business loan. Separately, the low level of legal protection on commercial loans limits the corporate regulator's ability to act against lenders on commercial loans, although the governing Act still prohibits unconscionable conduct, misleading or deceptive conduct, and unfair contract terms in standard form small business contracts, with the courts generally imposing a high bar on unconscionability in commercial lending. Both read 2 September 2026, at the ombudsman's small business page and the corporate regulator's Information Sheet 207 respectively. Neither is legal advice and neither says your complaint will fail.
One more piece of process. Where the business is under external administration, or the individual is bankrupt, the ombudsman is generally only able to consider the complaint if the consent of the insolvency practitioner, such as the liquidator or the trustee in bankruptcy, is obtained. That is worth checking early rather than after you have written the complaint.
Two adjacent problems arrive with guarantees often enough to name, and neither is a guarantee. If the exposure you are worried about is unpaid company tax, that is a director penalty notice, a statutory liability with its own rules and its own clock, and it is covered in the director penalty notice guide. If the wider question is what finance is available to a business owner in this position at all, the business owners finance hub is the place to start.
A director's guarantee is a separate personal contract, which is why resignation, a share sale and company liquidation do not by themselves remove it. The practical exit is to identify exactly what the guarantee covers, choose the route that can actually end that liability, and finish the paperwork. For a negotiated release, the creditor must document it. For a payout or refinance, the covered liability must actually be extinguished and any continuing or all-obligations wording checked. Separate landlord, supplier and other guarantees still need their own release process.
Key takeaway: do not ask only 'has the loan been paid?' Ask 'what exactly ended this guarantee, and what document proves it?'Before you use the buttons below, check which situation you are in. If a demand has arrived, or the company cannot pay its debts, the first call is a solicitor or a registered insolvency practitioner, not a broker. If you are signing, refinancing, selling or trying to get a covenant replaced, that is the conversation we can actually help with.
Frequently Asked Questions
Yes. A director's guarantee is an ordinary contract between you and the creditor, and courts enforce it. Where the creditor is a bank that subscribes to the 2025 Banking Code of Practice, it has committed to an enforcement sequence: it will not enforce security you gave in connection with the guarantee unless it has first enforced the borrower's security, and it will not enforce a judgment against you unless it has also obtained a court judgment against the borrower that remains unpaid at least 30 days after written demand, or cannot locate the borrower after reasonable attempts, or the borrower is insolvent. Non-bank and private lenders are not bound by that Code.
Signing a guarantee is a promise to pay, not a mortgage, so the guarantee by itself does not hand a creditor your house. Two things change that position. The first is a mortgage or other security you gave over the home in connection with the guarantee, which is common on business lending and is the usual reason the family home is exposed at all. The second is a judgment obtained against you personally, which opens the ordinary enforcement routes against your assets.
Where a subscribing bank holds security you gave, the Banking Code enforcement sequence applies first: the borrower's security is enforced before yours. Using the family home as security for a business loan is a question of its own and is dealt with in its own guide. What a creditor can and cannot reach in your particular case is a matter for a solicitor.
There is no public register of personal guarantees, so the answer is in the paperwork and with the lender rather than in a search you can run. Start with the loan offer and the schedule of securities attached to it, then the settlement pack from the solicitor who acted on the loan, then ask the lender directly and in writing for copies of every guarantee it holds from you.
Where the creditor is a subscribing bank and you are not one of the guarantor categories carved out of paragraph 117 of the 2025 Banking Code of Practice, it has said it will give you additional copies of your guarantee information within 30 days of a request. A sole director guarantor is one of the carved out categories, so that route is not available to a one director company's director. The full set of routes is set out above.
Two different things get confused here. A director's guarantee makes you liable for the specific company debts you have guaranteed, on the terms of the guarantee document. Separately, statutory liabilities can attach to a director without any guarantee at all, and unpaid company tax under a director penalty notice is the common one.
A director is not personally liable for the company's ordinary trading debts simply by being a director, which is the whole point of limited liability. It is the guarantee you signed, or a statutory liability, that reaches you. They are not the same instrument and they do not end the same way.
Nothing happens at all until the company fails to pay. A guarantee sits dormant while the borrower meets its obligations, and it is the company's default that turns it into a live personal debt. At that point the creditor can look to you for the guaranteed liability, on the terms of the document you signed, and your own assets stand behind it. In the meantime it still affects you in ways people do not expect: it stays alive after you resign, it can cover facilities beyond the one in front of you if it carries all obligations wording, and other lenders will take it into account when you borrow personally.
In the sense that matters on business lending, the two divisions worth knowing are limited against unlimited, and guarantee against indemnity. A limited guarantee stops at a stated amount or a named security, an unlimited one has no ceiling written into it. Separately, a guarantee is a secondary promise that depends on the company's liability existing, while an indemnity is a primary promise to make good a loss in your own right, and most commercial documents contain both. A third division people run into is joint against joint and several, which decides whether a creditor can pursue one guarantor for the whole amount.
Yes. There are four practical routes that can end the liability: a written creditor release; a replacement guarantor or substitute arrangement the creditor accepts with your release documented; full repayment or refinance that extinguishes the liability the guarantee covers; or, rarely, a successful legal challenge. Resigning, selling shares or winding up the company does not do it by itself. On a Code-covered facility, paragraph 123 of the 2025 Banking Code says a guarantor may end liability by paying the lower of the borrower's outstanding liability or the guarantee limit, or by making another arrangement the bank agrees to in return for release.
If you are relying on payout or refinance rather than a signed release, check continuing and all-obligations wording so you know no other covered liability survives.
Resigning does not start a countdown because resignation does not itself end the guarantee. You remain exposed for as long as the guarantee continues to answer for a liability under its terms. The exit is a release or another route that ends the covered liability, not the ASIC resignation date.
A creditor may pursue you personally under the guarantee and, if it obtains a judgment, use the ordinary enforcement processes available for a judgment debt. If the matter reaches a bankruptcy notice, AFSA says a person generally has 21 days from service to comply, although the period can differ and the notice itself must be checked.
Get legal advice early. If the company is insolvent or near insolvency, also speak to a registered insolvency practitioner before moving company money to deal with a debt you have personally guaranteed. A refinance may sometimes clear the guaranteed liability, but the options narrow as enforcement progresses.
Yes, a company ending does not by itself erase a separate personal guarantee. The guarantee is a contract between you and the creditor and can survive the company's liquidation or deregistration if liability remains under its terms. That is why a sale, resignation, liquidation or deregistration should never be treated as release evidence.
A guarantee is generally a secondary promise to answer for another party's obligation. An indemnity is a primary promise to make good a defined loss in your own right. Commercial documents often contain both, so the document title does not tell you the whole exposure. A solicitor should read the combined wording if enforceability or scope is in issue.
It can affect what is recorded or accessed in credit reporting. Equifax says a credit report may be updated when a person agrees to act as a guarantor, and the OAIC confirms a credit provider may access a consumer credit report to assess whether to accept someone as a guarantor where the required consent is given. A later default, court judgment or bankruptcy can create separate adverse information.
If you are about to apply for a home loan or other personal credit, get a copy of your credit report and disclose the guarantee to your broker or lender rather than assuming it is invisible. The business credit report guide explains how commercial and personal credit information intersect for business owners.
For as long as it stands and the guaranteed liability exists. A guarantee drafted as continuing stays alive across future advances and redraws rather than ending when a particular drawing is repaid, which is why old guarantees keep turning up on facilities people thought were closed. There is no point at which it lapses because time has passed or because you have stopped being a director. It ends when the creditor releases you in writing, or when the liability it answers for no longer exists.
In Australian small business lending they describe the same instrument. A personal guarantee is the general term for an individual promising to answer for someone else's debt. A director's guarantee is the version given by a director of the borrowing company, which is the most common case. The distinction that actually matters is not the name but the terms: whether it is limited, whether it is continuing, whether it carries all obligations wording, and whether it is joint and several.
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