---
title: "Director's personal guarantee: a supplier's guide"
description: "When to ask a customer's directors to guarantee a trade account, what the guarantee should cover, and whether they can sign online in NZ, Australia and the UK."
url: https://www.paidnice.com/blog/director-personal-guarantee-credit-application
---

# Director's personal guarantee on a credit application: a supplier's guide for NZ, Australia and the UK

Written by

Denym Bird
Expert verified

Co-founder & CEO of Paidnice

Denym traced the guarantee and e-signature rules for New Zealand, Australia and the United Kingdom back to the legislation, and broke down what a supplier's guarantee clause should cover.

Reviewed by Ashley Schroder

Co-founder of Paidnice

Published Nov 11, 2026 · 7 min

## Summary

You can ask each director of a limited company customer to personally guarantee its trade account, and the director can sign online. New Zealand, Victoria and England and Wales require a guarantee in writing and signed by the guarantor, and the law in each lets an electronic signature meet that rule. A witness comes in only for a deed.

- **When to ask:** Ask when the customer is a limited company and you would struggle to recover the debt from the company alone: new companies, large limits, or a weak payment record.
- **What it covers:** Who guarantees, which debts, any cap, how long it lasts, how a director ends it for future debts, and that each director is liable for the full amount.
- **Signing online:** An electronic signature can meet the writing and signing rules when the method identifies the director and shows they approved the terms. Keep a record of what they signed and when.

A new customer's credit application lands in your inbox. The director signed for the company and left the personal guarantee box blank. If the company stops paying, your claim is against the company, which may have little to pay you with.

Here is what a director's guarantee does, when to ask for one, what the clause should cover, and whether a director can sign it online in New Zealand, Australia and the United Kingdom.

This is general information, not legal advice. Have a lawyer check your own terms and guarantee wording.

## What is a director's personal guarantee?

A director's personal guarantee is a promise by a director, as an individual, to pay the company's debts to you if the company does not.

A limited company is a separate legal person. When a director signs your credit application for the company, the company owes you, and the director usually does not. The guarantee adds a second person you can ask to pay.

The director signs twice: once for the company on the application, and once in their own name on the guarantee. A signature with a job title such as "Director" can read as a signature for the company, so the guarantee should ask for the director's own name with no title.

Free: Payment reminder email templatesCopy the reminder emails for before, on and after the due date.

## When should a supplier ask for a directors guarantee?

Ask for a directors guarantee when the customer is a limited company and the company alone may not be able to pay what it could owe you at its credit limit.

- **New companies.** A company with little trading history has few trade references and nothing for you to judge.
- **Large limits.** The higher the limit, the more you lose if the company fails. Our guide to [setting a credit limit](https://www.paidnice.com/blog/how-to-set-a-credit-limit) covers how to size it.
- **Weak references.** If [trade references](https://www.paidnice.com/blog/what-is-a-trade-reference) say the company pays late, a guarantee covers some of that risk.
- **A limit increase.** A customer who asks for more credit can be asked for a guarantee at that point.

Some suppliers ask every limited company customer. Others ask only above a set limit. Write the rule into your [credit policy](https://www.paidnice.com/blog/credit-policy-template) so every applicant gets the same treatment. A sole trader is already personally liable for the business's debts, so a guarantee from them adds little.

## What should a personal guarantee clause cover?

A personal guarantee clause should say who guarantees, which debts it covers, how much, for how long and how it ends. These are the points to put to your lawyer, not a template to copy.

| Point | What to decide |
| --- | --- |
| Who guarantees | Every director, or the directors you name. Get each one's full name and address. |
| Which debts | All amounts the company owes on the account, now and in the future, or only orders up to a date. |
| How much | No cap, or a cap such as the credit limit. Say whether interest, late fees and collection costs are inside the cap. |
| Limit changes | Whether the guarantee still covers the account after you raise the credit limit. |
| Several directors | Whether each director is liable for the full amount, so you can ask any one of them. |
| How it ends | How a director who resigns or sells the company gives notice, and that debts owed before the notice stay covered. |
| Consent to checks | Permission to run a credit check on the guarantor, where your market requires consent. |

The [credit application form](https://www.paidnice.com/blog/credit-application-form) guide has a short sample guarantee line and the consent wording Australia's privacy regulator expects for a guarantor credit check.

## Does a personal guarantee have to be in writing?

A personal guarantee has to be in writing and signed by the guarantor in New Zealand, in Victoria and in England and Wales. A spoken promise to pay does not meet these rules.

- **New Zealand.** Section 27 of the [Property Law Act 2007](https://www.legislation.govt.nz/act/public/2007/0091/latest/DLM968989.html) says a contract of guarantee must be in writing and signed by the guarantor.
- **Australia.** Each state has its own rule. In Victoria, section 126 of the [Instruments Act 1958](https://www.legislation.vic.gov.au/in-force/acts/instruments-act-1958) says no action can be brought on a promise to answer for another person's debt unless it, or a note of it, is in writing and signed by the person to be charged.
- **United Kingdom.** In England and Wales, section 4 of the [Statute of Frauds 1677](https://www.legislation.gov.uk/aep/Cha2/29/3/section/IV) sets the same rule: the agreement, or a memorandum of it, must be in writing and signed by the guarantor or someone they authorise.

If your customers are in another Australian state, or in Scotland or Northern Ireland, ask a local lawyer which rule applies.

## Does a personal guarantee need to be witnessed?

A personal guarantee signed as an ordinary contract does not need a witness under the rules above. A witness becomes a requirement when the guarantee is drafted as a deed.

In England and Wales, section 1(3) of the [Law of Property (Miscellaneous Provisions) Act 1989](https://www.legislation.gov.uk/ukpga/1989/34/section/1) says an individual executes a deed by signing it in the presence of a witness who attests the signature. The [Law Commission's 2019 report](https://cdn.websitebuilder.service.justice.gov.uk/uploads/sites/54/2025/12/Electronic-Execution-Report.pdf) took the view that "in the presence of a witness" means physical presence, even when both use electronic signatures.

In New Zealand, section 9 of the Property Law Act 2007 says an individual executes a deed by signing it with the signature witnessed. Some suppliers use deeds for guarantees for their own legal reasons. Ask your lawyer whether yours should be one, because it changes how a director can sign.

## Can a director sign a personal guarantee online?

A director can sign a personal guarantee online in all three markets, because each has a law that lets an electronic signature meet a requirement for a signature, with conditions.

| Market | The rule for electronic signatures | Conditions |
| --- | --- | --- |
| New Zealand | Sections 222 and 226 of the [Contract and Commercial Law Act 2017](https://www.legislation.govt.nz/act/public/2017/0005/latest/whole.html) let electronic information and an electronic signature meet a legal requirement for writing and a signature. | The signature must adequately identify the signer and show their approval, and be as reliable as appropriate for the purpose. |
| Australia | In Victoria, section 126(2) of the Instruments Act says the writing and signing rule can be met under the Electronic Transactions (Victoria) Act 2000. For Commonwealth laws, section 10 of the [Electronic Transactions Act 1999](https://www.legislation.gov.au/C2004A00553/latest/text) sets the test. | Under section 10, a method must identify the person and show their intention, be as reliable as appropriate, and the person receiving the signature must consent to it. |
| United Kingdom | The [Law Commission (2019)](https://cdn.websitebuilder.service.justice.gov.uk/uploads/sites/54/2025/12/Electronic-Execution-Report.pdf) concluded an electronic signature is capable in law of executing a document, including where a statute requires a signature. Section 7 of the [Electronic Communications Act 2000](https://www.legislation.gov.uk/ukpga/2000/7/section/7) makes electronic signatures admissible in evidence. | The signer must intend to authenticate the document, and any other formalities, such as a witness for a deed, must still be met. |

None of these laws says a particular tool or method is enough in every case. Whether a signature holds up depends on the facts, so have a lawyer review how you collect it.

## What should you keep when a director signs online?

When a director signs a personal guarantee online, keep the evidence that shows who signed, what they signed and when. That is what you will need if a director later says they never agreed.

1. **The exact terms.** Store a copy of the wording the director saw, not your current version. Terms change, and you need the version they signed.
2. **The signer.** Record the director's full name and email, and check the name against the company register: [NZ Companies Office](https://www.companiesoffice.govt.nz/), [ASIC](https://www.asic.gov.au/online-services/search-asic-s-registers/) or [Companies House](https://find-and-update.company-information.service.gov.uk/).
3. **The time and place.** Record the date and time of signing and the IP address it came from.
4. **One guarantee per director.** Each director signs their own guarantee from their own email link, not one director for all.

## How do you take a director's guarantee online?

You can take a director's guarantee online inside a credit application, with each director signing as part of the terms. Paidnice is running a beta program for credit applications, open to anyone interested.

On the [credit applications page](https://www.paidnice.com/credit-applications), a supplier turns on the directors and personal guarantees sections and writes their own terms. The applicant form has four steps: Your business, Directors, Trade references and Terms.

Each director signs a guarantee on a signature pad. Paidnice stores the date, the IP address and a copy of the exact terms shown with each signed application.

That record describes the signing. Your lawyer still decides whether your terms and guarantee wording suit your market. To join the beta, leave your email on the [credit applications page](https://www.paidnice.com/credit-applications).

After approval, the customer's account opens. Paidnice gives every customer a 0 to 100 [credit score](https://www.paidnice.com/credit-scoring) from how they pay you, so you can see when a guaranteed account starts to slip. If it does, an [escalation](https://www.paidnice.com/escalations) puts the case, and the guarantee, in front of a person.

💡 Paidnice insight

When a guaranteed account goes unpaid, the first question is what the director signed. Store the exact terms each director signed, next to the account, so nobody has to search for the paper when the company stops paying.

## Frequently asked questions

### Is a personal guarantee from a director of a limited company enforceable?

A guarantee is a contract, so it can be enforced like one when it meets the formal rules, such as writing and a signature in New Zealand, Victoria and England and Wales. Courts look at the exact wording and facts. Ask a lawyer to check yours.

### Are electronic signatures legally binding on a guarantee?

The laws in New Zealand, Australia and the UK let an electronic signature meet a requirement for a signature, with conditions such as identifying the signer and showing their approval. Whether a particular signature holds up depends on the method and the facts.

### Can I use a personal guarantee template?

A template gives you a starting point. Use the points in the table above to brief a lawyer in your market, and keep the guarantee wording inside your terms so every director sees it before signing.

### What if one director refuses to sign?

Decide in your [credit policy](https://www.paidnice.com/blog/credit-policy-template) what happens: a lower limit, a deposit, cash on delivery, or a guarantee from the other directors only. Apply the same rule to every applicant.

### Does a guarantee end when the director resigns?

That depends on the wording. A clause can let a director give notice to end cover for future debts while debts owed before the notice stay covered. Decide the rule with your lawyer and put it in the guarantee.

## Paidnice features in this article

- [**Credit scoring** Gives every customer a score from 0 to 100, from how they pay.](https://www.paidnice.com/credit-scoring)
- [**Escalations** Hands a call, a credit stop or a letter to the right person when reminders do not work.](https://www.paidnice.com/escalations)

## About the editorial team

Written by Denym Bird Co-founder & CEO of Paidnice

Denym started Paidnice in 2022 after customers paying late left his own business short on payroll. He has led it to $1 billion collected on time across more than 1 million invoices, and writes about credit control, late fees and getting paid on Xero and QuickBooks.

Reviewed by Ashley Schroder Co-founder of Paidnice

Ashley is a co-founder and lead developer of Paidnice and has built accounting software for more than 10 years. He builds the ledger connections that put reminders, late fees and payments into Xero, QuickBooks and ERPs such as NetSuite and Business Central. Before Paidnice he co-founded A2X, ecommerce accounting software for Xero and QuickBooks.

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