A personal guarantee is a contract in which an individual personally promises to be responsible for another party’s debt or obligation if that party fails to perform. Personal guarantees are common in commercial transactions where a creditor — such as a bank, commercial landlord, equipment lessor, or supplier — wants additional security beyond what a corporate borrower or tenant can offer. In Alberta, personal guarantees are subject to a unique statutory requirement: any individual giving a personal guarantee must acknowledge it before a lawyer who certifies that the guarantor understands the document. Whether you are being asked to sign a personal guarantee or you are a creditor seeking one as security, understanding how personal guarantees work in Alberta is essential.
When creditors require it. Banks, commercial landlords, equipment lessors, and suppliers commonly require personal guarantees from business owners as a condition of extending credit, financing, or leasing arrangements. Before signing, it is important to understand the scope of what you are personally agreeing to be liable for, how long the guarantee lasts, and what circumstances could trigger enforcement against you.
You are a creditor seeking security. Creditors who want protection beyond a corporate borrower’s assets often require personal guarantees from directors, shareholders, or principals. A properly drafted personal guarantee that complies with Alberta’s statutory requirements significantly improves the creditor’s ability to recover if the principal debtor defaults.
Guarantees Acknowledgment Act, RSA 2000, c G-11. Alberta legislation governing the formal requirements for personal guarantees.
Limitations Act, RSA 2000, c L-12. Alberta legislation establishing the basic two-year limitation period for most civil claims, including claims to enforce a personal guarantee.
Failing to comply with the Guarantees Acknowledgment Act. A personal guarantee given by an individual in Alberta must follow the procedure set out in the Guarantees Acknowledgment Act — including appearance before a lawyer, examination by the lawyer, and a certificate in the prescribed form attached to the guarantee. A guarantee that does not comply with these requirements can be unenforceable against the guarantor.
Not understanding the scope of the guarantee. A personal guarantee can be limited to a specific debt and amount, or it can be a continuing all-monies guarantee that covers all present and future obligations of the principal debtor. Signing a continuing guarantee without understanding its scope can result in personal liability for debts that did not exist when the guarantee was signed.
Joint and several liability between guarantors. When multiple individuals guarantee the same obligation, they are typically jointly and severally liable, meaning the creditor can pursue any one of them for the full amount. A guarantor who pays more than their share may have a right of contribution against the others, but recovering it can be difficult.
Failing to terminate or release a guarantee. A personal guarantee does not automatically terminate when the guarantor leaves the business or sells their shares. Without a formal release from the creditor, the guarantor may remain liable for obligations incurred long after they ceased to be involved with the principal debtor.
Why do I need to sign a personal guarantee in front of a lawyer? Alberta’s Guarantees Acknowledgment Act requires that any individual giving a personal guarantee acknowledge it before a lawyer, who must be satisfied that the guarantor understands the document. The lawyer issues a certificate in the prescribed form, which is then attached to the guarantee. Without this certificate, the guarantee is generally unenforceable.
Can a personal guarantee be cancelled? A personal guarantee can only be terminated in accordance with its terms or with the consent of the creditor. Many guarantees are continuing in nature and remain in force until the creditor formally releases the guarantor — even if the guarantor has left the business or believes the underlying debt has been paid.
What happens if the company I guaranteed goes bankrupt? The bankruptcy of the principal debtor does not extinguish a personal guarantee. The creditor can generally still pursue the guarantor personally for any unpaid balance, subject to the terms of the guarantee and applicable limitation periods.
Can a personal guarantee be signed by video conference? Alberta’s Guarantees Acknowledgment Act now permits the lawyer’s acknowledgment to be conducted by two-way video conference, with a separate prescribed certificate form for that purpose. Whether video acknowledgment is appropriate depends on the lawyer’s assessment and the nature of the guarantee.
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