Mergers & Acquisitions · Question

Will my personal guarantees to lenders end when the business is sold?

Short answer

No, not automatically. A personal guarantee is a separate contract between you and the lender, so it usually continues until the lender releases you in writing or the guaranteed debt is fully repaid. Selling the shares or the business does not change that. Make the release or repayment of guaranteed loans a condition of the sale, with documents to prove it.

In more detail

Promoters often assume the buyer simply takes over the loans and the guarantees with them. The lender, however, agreed to lend on the strength of your guarantee and is not bound to give it up because ownership changed.

Typical ways to resolve it

Repayment at closing: the buyer arranges funds, or part of the price goes straight to the lender, to clear the loans, and the lender issues a no-dues confirmation and releases guarantees.
Refinancing by the buyer: the buyer's own lender replaces the old facility, and the old lender closes the account.
Substitution: the lender agrees to accept the buyer or a buyer-group entity as guarantor in your place, and issues a written release to you.
Continuing exposure with protection: if release cannot be done at closing, the agreement gives you an indemnity and a defined deadline for releasing you.

Do not forget the others

Check corporate guarantees given by your group companies, security over personal or family property, and any post-dated cheques or undertakings held by lenders. Each needs its own release.

An indemnity from the buyer is not a release

If the buyer promises to protect you but the lender still holds your guarantee, the lender can pursue you if the buyer fails. Keep the buyer's promise as a backup, not a replacement.

List every facility and guarantee early, and raise the topic with the buyer during the term sheet stage. Lenders may need time and their own approvals, so closing dates should allow for it. Ask your lawyer to confirm the release documents once received.

Key points

A personal guarantee is a separate contract and continues until the lender releases it in writing.
Selling the business does not by itself cancel guarantees, security or undertakings to lenders.
Common solutions are repayment at closing, refinancing, or substitution of guarantor with a written release.
Make release a closing condition and obtain no-dues confirmations.
A buyer's indemnity does not replace the lender's release.

Who this applies to

Promoters who gave personal guarantees for company loans and plan to sell.
Family members who guaranteed borrowings or provided property as security.
Buyers needing to arrange refinancing or replacement guarantees.

Last reviewed 3 October 2026

This answer is general information, not advice on your particular case. Terms, eligibility, and requirements change, so check the current position with the relevant institution or authority. Lalsar Holdings' financial advisory and financing work is advisory and facilitation only. Lalsar Holdings is not a lender. Sanction and disbursement of any credit facility is at the sole discretion of the partner bank, NBFC, or financial institution involved, subject to their own eligibility criteria and credit policy.