Personal Guarantee Agreement Template for Hong Kong

A Personal Guarantee Agreement is a legally binding contract that makes you personally responsible for someone else's debt or obligation if they fail to meet their commitments. Under Hong Kong law, this document serves as crucial security for creditors, ensuring they have recourse beyond the original debtor when payments are not made as agreed.

When do you need this document?

You will typically encounter Personal Guarantee Agreements when applying for business loans as a company director, co-signing commercial leases for your business premises, or guaranteeing credit facilities for companies you control. Banks and financial institutions routinely require personal guarantees from business owners when extending credit to companies, particularly for new businesses or those with limited credit history. Property landlords often demand personal guarantees from company directors when leasing commercial premises, ensuring rent payments even if the business fails. Additionally, suppliers may request personal guarantees before extending trade credit terms to new business customers.

Key legal considerations

The scope of your guarantee is perhaps the most critical element to understand, as it defines exactly what obligations you are personally undertaking. Some guarantees are limited to specific amounts or time periods, while others may be unlimited and continuing guarantees that cover all present and future debts. The agreement should clearly specify whether it covers just the principal debt or extends to interest, costs, and legal fees. Enforcement provisions determine how and when the creditor can pursue you personally, including whether they must first attempt collection from the principal debtor. Indemnity clauses may make you liable for the creditor's costs and expenses in pursuing the debt. Release conditions are equally important, outlining how and when your guarantee obligations will end, as guarantees can continue indefinitely unless properly terminated.

Legal requirements in Hong Kong

Under Hong Kong law, Personal Guarantee Agreements must comply with the Contract and Rights of Third Parties Ordinance (Cap. 623) for proper formation and enforceability. The document requires clear identification of all parties, including full legal names and addresses of the guarantor, creditor, and principal debtor. Proper execution typically requires witnessing, and the agreement should include specific provisions regarding Hong Kong jurisdiction and governing law. If the guarantee relates to money lending, compliance with the Money Lenders Ordinance (Cap. 163) may be necessary. The Limitation Ordinance (Cap. 347) sets time limits for enforcement actions, so the agreement should address limitation periods appropriately. For guarantees involving property or secured transactions, additional compliance with the Property Law and Conveyancing Ordinance (Cap. 219) may be required. Professional legal advice is recommended to ensure full compliance with all applicable Hong Kong ordinances and to understand the full extent of your personal liability.