Document background
The Personal Guarantee Letter is a fundamental document in Indian business and financial transactions, particularly used when securing loans, credit facilities, or other financial obligations. It serves as a risk mitigation tool where an individual (typically a company director, promoter, or wealthy individual) personally guarantees the debts or obligations of another party (usually a company or individual). The document is governed by the Indian Contract Act, 1872, and must comply with specific legal requirements to be enforceable. Personal Guarantee Letters are commonly required by banks and financial institutions when extending corporate loans, especially to small and medium enterprises where the company's assets alone may not provide sufficient security. The document typically includes detailed information about the guaranteed obligations, conditions for invoking the guarantee, and the extent of the guarantor's liability. Recent regulatory changes in India, including those by the Reserve Bank of India and under the Insolvency and Bankruptcy Code, have made these documents even more significant in the business landscape.
