Hidden Personal Guarantee Clauses: A Client's Close Call

One morning, I woke up to eight missed calls from a longtime client.

When I finally spoke to him, he sounded like he was on the verge of tears.

“Bro, I’m being sued personally for a debt owed by my old company. They say I signed a personal guarantee, but I never did! This is nonsense!”

I asked him to forward the documents the counterparty was relying on.

At first glance, the contract looked like any other: boilerplate wording, general terms, nothing out of the ordinary. No clause that explicitly mentioned “Personal Guarantee.”

But on my second read, there it was.

Buried on page 4 under the vague heading “Liability” sat one very carefully drafted line:

“The signatory herein explicitly agrees to jointly bear the payment obligations of the Company in his/her own capacity.”

That single sentence was enough to drag his personal assets into the line of fire.

A company structure (like an Sdn Bhd) is supposed to protect directors and shareholders with limited liability. But a cleverly worded clause can pierce that shield and make you personally liable.

My client was fortunate. His previous employer stepped in to negotiate an amicable settlement, with the outstanding sum to be paid by instalments.

But not everyone will be this lucky.

Be cautious whenever you see terms like:

“jointly”

“personally”

“undertake”

“agrees to”

Any of these may create personal obligations for you as the signatory. Even if the contract looks “standard.”

Key Takeaway

Never sign contracts blindly. Hidden landmines can sit inside even the most routine agreements. If you’re unsure, always seek qualified legal advice before putting pen to paper. It’s far cheaper than fighting a claim that puts your house, savings, or personal assets at risk. AUTHOR PROFILE

Rudi Cheu is the principal of Rule & Co. Advocates & Solicitors; a Malaysian law firm focusing on practical and cost-effective solutions for debt recovery and commercial disputes. With nearly a decade of debt recovery experience under his belt; Rudi is passionate about helping businesses navigate debt recovery challenges and shares insights at www.rulecolaw.com/blog and recoverdebt.my

He can be reached via Whatsapp: +60102028095 or via email: rudi@rulecolaw.com