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Personal Guarantee Letter Template for Hong Kong

A Personal Guarantee Letter is a formal document used in Hong Kong's legal framework where an individual (the guarantor) commits to taking responsibility for another party's financial obligations if they fail to meet them. The document, governed by Hong Kong law, particularly the Contract and Rights of Third Parties Ordinance (Cap. 623), serves as a legally binding commitment that provides additional security to creditors. It includes specific details about the guaranteed obligations, conditions for enforcement, and the extent of the guarantor's liability, while incorporating necessary protections and requirements under Hong Kong's financial regulations and contract law.

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What is a Personal Guarantee Letter?

The Personal Guarantee Letter is a crucial document in Hong Kong's commercial and financial landscape, commonly used when additional security is required for loans, credit facilities, or other financial obligations. It serves as a risk mitigation tool for creditors while facilitating access to credit for businesses and individuals. The document must comply with Hong Kong's legal requirements, including the Contract and Rights of Third Parties Ordinance and relevant banking regulations. Personal Guarantee Letters are particularly important in situations involving small business loans, property transactions, or corporate borrowing where the principal debtor's creditworthiness alone may not satisfy the lender's requirements. The document typically includes detailed information about the guaranteed obligations, enforcement mechanisms, and the guarantor's maximum liability, while ensuring compliance with Hong Kong's consumer protection and banking regulations.

What sections should be included in a Personal Guarantee Letter?

1. Date and Parties: Clear identification of the guarantor, creditor, and the principal debtor

2. Reference to Principal Agreement: Details of the main agreement or debt being guaranteed, including dates, parties, and nature of obligations

3. Guarantee Statement: Clear and unequivocal statement of the guarantee being provided, including the scope and limit of the guarantee

4. Nature and Extent of Liability: Specific details of what is being guaranteed and the maximum liability amount if applicable

5. Duration of Guarantee: Time period of the guarantee and any conditions for termination

6. Payment Terms: Specifics about when and how payments under the guarantee must be made

7. Enforcement Terms: Conditions under which the guarantee can be enforced and the process for enforcement

8. Signature Block: Space for guarantor's signature, witness details, and date of execution

What sections are optional to include in a Personal Guarantee Letter?

1. Joint and Several Liability: Required when there are multiple guarantors, specifying their joint and several liability

2. Security Provisions: Include when the guarantee is secured by specific assets or collateral

3. Foreign Currency Provisions: Required when the guaranteed amount is in a currency other than Hong Kong Dollars

4. Independent Legal Advice Confirmation: Recommended when dealing with individual guarantors to prevent future claims of undue influence or lack of understanding

5. Guarantee Limit: Optional section specifying maximum liability limit, if the guarantee is not unlimited

What schedules should be included in a Personal Guarantee Letter?

1. Schedule of Guaranteed Obligations: Detailed list of the specific obligations being guaranteed

2. Schedule of Security: Details of any security or assets provided to support the guarantee, if applicable

3. Certificate of Independent Legal Advice: Formal confirmation from a lawyer that the guarantor has received independent legal advice

4. Signature Requirements: Specific execution formalities and witness requirements

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Hong Kong

Publisher

Ƶ

Document Type

Guarantee Agreement

Sector

Banking

Cost

Free to use

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