- In a joint and several guarantee, each guarantor is independently liable for the full amount of the guaranteed debt — not a proportionate share of it.
- The lender isn't stuck pursuing multiple parties in fixed proportions, or worrying that one guarantor might be judgment-proof while the others have assets.
- If one guarantor ends up paying more than their fair share to the lender, Ontario law generally recognizes a right of contribution — a separate claim that guarantor can bring against the…
When two or more business owners sign a personal guarantee together, most assume their exposure lines up with their ownership stake — a 50% shareholder is on the hook for half the debt, a 20% shareholder for a fifth. That assumption is usually wrong. Most lenders use a joint and several guarantee, and under it, each co-guarantor can be pursued for the entire debt, regardless of how the business is actually owned.
This is one of the most misunderstood terms in small-business financing, and it matters most in exactly the moment it's easy to overlook: when co-founders are excited about a new loan and eager to sign whatever paperwork gets the money moving.
What "Joint and Several" Actually Means
In a joint and several guarantee, each guarantor is independently liable for the full amount of the guaranteed debt — not a proportionate share of it. The lender is not required to split its claim evenly among guarantors, pursue everyone at once, or chase each person only for their "fair share." It can go after whichever guarantor is easiest to collect from, for the whole balance, and leave that guarantor to sort out the rest with the others afterward.
This is different from a several (or proportionate) guarantee, where each guarantor's liability is capped at a defined share — a structure lenders are generally less enthusiastic about, but one that can sometimes be negotiated.
Why Lenders Prefer It
- Maximum recovery flexibility. The lender isn't stuck pursuing multiple parties in fixed proportions, or worrying that one guarantor might be judgment-proof while the others have assets.
- Simpler collection. Rather than dividing a claim among several guarantors and pursuing each separately for a partial amount, the lender can concentrate on whoever is most likely to actually pay.
- Pressure shifts to the guarantors. Sorting out who ultimately bears how much of the loss becomes a problem between the guarantors themselves, not the lender's problem.
Contribution Rights Between Co-Guarantors
If one guarantor ends up paying more than their fair share to the lender, Ontario law generally recognizes a right of contribution — a separate claim that guarantor can bring against the other co-guarantors to rebalance who ultimately bears the loss. This is a real right, but it comes with a practical catch: it's a second lawsuit, against people who may not have the money to pay their share even if a court agrees they owe it.
Because of this, co-guarantors are often better served by addressing allocation before anything goes wrong — through a separate written agreement among themselves setting out each person's expected share and what happens if one of them can't pay. The lender typically isn't bound by that internal arrangement, but it gives the co-guarantors a clear basis to sort things out among themselves.
Joint and Several vs. Several Guarantee
| Joint and Several Guarantee | Several (Proportionate) Guarantee | |
|---|---|---|
| Liability per guarantor | Each liable for the full debt | Each liable only for a defined share |
| Lender's collection choice | Can pursue any guarantor, or all, for the full amount | Generally limited to pursuing each guarantor's own share |
| Risk if a co-guarantor can't pay | Falls on the remaining guarantor(s) | Generally stays the lender's risk, not the other guarantors' |
| How common is it | The default position most lenders start from | Requires specific negotiation to obtain |
What to Negotiate as a Co-Guarantor
- [ ] Ask whether a several (capped, proportionate) guarantee is available — it may not be, but it's worth raising.
- [ ] If joint and several is unavoidable, put a separate written contribution or indemnity agreement in place among the co-guarantors, defining expected shares.
- [ ] Understand clearly that your exposure could be to the entire debt, not a percentage tied to your ownership stake.
- [ ] Ask what happens to your exposure if a co-guarantor leaves the business, sells their shares, or becomes insolvent.
- [ ] Get independent legal advice, particularly if co-guarantors have unequal ownership stakes or unequal ability to pay.
Frequently asked questions
If I own 20% of the company, am I only liable for 20% of the guaranteed debt?
Not under a joint and several guarantee. Your ownership percentage doesn't limit your exposure — you can be pursued for the full debt regardless of your shareholding, unless the guarantee is specifically structured otherwise.
Can the lender choose to sue just one co-guarantor instead of all of them?
Generally, yes. Under a joint and several guarantee, the lender can pursue whichever guarantor it believes is most likely to pay, for the full amount, without first pursuing the others.
What happens if one co-guarantor can't pay their share?
The guarantor who did pay may have a right of contribution against the others, but collecting on that right is a separate process and depends on whether the non-paying guarantor actually has assets to satisfy it.
Can co-guarantors agree between themselves to split liability differently than the lender's guarantee says?
Yes, through a private agreement among themselves — but that agreement generally doesn't bind the lender. The lender can still rely on the joint and several terms of its own guarantee regardless of what the guarantors have agreed privately.
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