Personal guarantee for a sourcing order: what to check
Before signing, identify the exact obligations guaranteed, negotiate an overall financial cap and check how future orders, disputes and termination are handled. Take the complete documents to an independent UK solicitor for advice on your personal exposure. Ask for the sourcing documents from Cambridge China Bridge.
Identify the people and documents involved
A personal guarantee could expose a director’s personal assets to claims. Request the complete proposed guarantee, the supply contract, incorporated terms and any account application. Record the buyer company, the individual guarantor and the party receiving the guarantee. Ask why a personal guarantee is being requested and whether different payment arrangements would remove the request.
Confirm whether you are buying from a UK sourcing seller or contracting directly with a factory. Start with the UK seller supply terms guide. Supplier capability is a separate assessment: use the factory audit checklist for that work, then assess the proposed personal commitment against the actual contract.
Define exactly what you would guarantee
Ask for the guarantee to identify the agreed order and covered obligations expressly. Check whether its wording refers only to unpaid goods invoices or also to tooling, storage, freight, cancellation charges, damages or every obligation under the supply contract. Request a written explanation of any wording covering all debts, future orders or connected companies.
Ask your solicitor to examine any indemnity, payment-on-demand wording and clauses dealing with contract changes. Ask whether a demand could arise while the company disputes defective goods or an invoice, and what evidence the claimant would need. Bring the inspection and payment approval terms; the withholding payment guide helps you prepare the underlying order questions.
Calculate the full personal exposure
Negotiate an overall cap expressed in an agreed currency. Ask whether interest, enforcement expenses and legal costs sit inside that cap or outside it. Request a worked explanation using the proposed contract amounts, including unpaid invoices and additional charges. Compare the resulting exposure with what you could personally afford without depending on selling the imported stock.
If other people would also sign, ask your solicitor whether the wording permits a claim against you for the whole covered amount or only an agreed share. Check for separate security documents and references to personal property. Ask how payments, refunds and credit notes reduce the outstanding guaranteed amount, and whether later orders could replenish that exposure.
Separate stopping new cover from final release
Request wording that explains how to stop guaranteeing future orders: the notice recipient, delivery method, effective date and treatment of orders already accepted. Ask your solicitor what would remain covered after notice, payment, order cancellation, leaving the business or a change of ownership. Do not base your decision on a verbal promise that the guarantee ends when your involvement ends.
Agree how final release will be documented and who will issue it. Ask for a clear process for reconciling invoices, disputed sums, refunds and remaining commitments before written release. Review the guarantee alongside the order cancellation guide, and ask specifically whether cancelling the order also releases the guarantor.
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Obtain independent UK advice before signing
Choose an independent UK solicitor to advise you personally. Send the complete documents, proposed amendments, correspondence and an outline of your financial circumstances. Ask them to review the applicable law, dispute forum, scope, cap, demand procedure, indemnity, termination and signing formalities. Request an explanation of unclear clauses in plain language.
Resolve unanswered questions and obtain the agreed final wording before signing. Compare the final version with the version your solicitor reviewed, including schedules and incorporated terms. Keep the signed documents, advice and subsequent release correspondence together. Cambridge China Bridge can provide the sourcing paperwork for review; obtain advice on the personal guarantee from your own solicitor.
Frequently asked questions
Does a personal guarantee cover future sourcing orders?
Check the proposed wording for future orders, all debts and connected companies. Ask for cover to be restricted to the named order if that is your intention, and have your solicitor confirm the final scope.
Can I cap a personal guarantee at the order value?
Request an overall cap and ask whether interest, legal costs and enforcement expenses are included. Have your solicitor check that the wording reflects the limit you negotiated.
Does leaving the company end my personal guarantee?
Ask your solicitor to check what happens when you leave. Request clear notice and release wording, including the treatment of existing debts and orders already accepted.
Should I get legal advice before signing a guarantee?
Take the complete guarantee and supply documents to an independent UK solicitor advising you personally. Ask them to explain the exposure, release process and signing requirements before you sign.