Personal Guarantees in Ontario: What Business Owners Are Actually Agreeing To
A personal guarantee is often treated as a formality.
It is not.
It is a separate obligation that sits outside the company and attaches directly to the individual.
The Structure of the Guarantee
A guarantee creates direct liability.
If the company fails to meet its obligations, the guarantor becomes responsible. This is not limited to specific assets unless the guarantee is structured that way.
The obligation is personal.
Separate From the Main Contract
The guarantee is often included alongside the main agreement but operates independently.
Even if the company disputes its obligations, the guarantor may still be required to perform.
The guarantee does not rely on the same defenses.
Scope of Liability
Many guarantees are broader than expected.
They may cover all obligations under the agreement, including future amendments, extensions, or additional amounts.
Without clear limits, the exposure can expand over time.
The Practical Takeaway
A personal guarantee is not a supporting clause.
It is a direct transfer of risk from the company to the individual.
Its impact depends on scope, not on how it is described.