Can directors be made personally liable for a business’s debt?

What options are available in terms of up-front guarantees or making the directors personally liable for the entity’s debt in the event of failure of a company?

Firms can request that the directors of a business sign a director’s guarantee – that is a secondary agreement to answer for the debt of another in case that company defaults. This contract should be drawn up by a lawyer.

Before having a director sign a guarantee, it is worthwhile investigating whether or not they have assets available to cover the debt – this can be done by running a relatively simple search such as a land titles search.

Of course, there is currently no means available to confirm whether a director has signed numerous such guarantees.

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Christine Christian was appointed CEO of D&B Australia and New Zealand in 2001 after leading the management buy-out of these operations from D&B global company. In this role, Christine has more than doubled the market value of D&B. In 2007 Christine managed the competitive sale process of D&B Australasia from AMP Capital to Lazard Carnegie Wylie.

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