Guarantee Agreement
The guarantee (“borgtocht/cautionnement”) can be defined as an agreement where one party, the guarantor, gives obligations towards another party, the beneficiary, to pay the debts of a certain debtor, in the event that this debtor fails to pay its debts. The granting of intra-group guarantees is a customary practice. This model agreement is a guarantee (“borgtocht/cautionnement”) which is regulated by articles 2011 to 2043 of the Civil Code. It should not be construed as a bank guarantee (“bankgarantie/garantie bancaire”), a letter of credit (“kredietbrief/lettre de crédit”), a documentary credit (“documentair krediet/crédit documentaire”), or a letter of comfort (“patronaatsverklaring/lettre de confort”) which are all related legal instruments or concepts that may also provide some assurance to a counterparty but where the legal scope is substantially different.The typical situation for this model is where a parent company issues a guarantee to a financial institution entering into a credit agreement with one of its subsidiaries. Guarantees offered by a parent company, or another member of the group with a suitable asset value, may be desirable because they may lead to a lower interest rate.
Before entering into or accepting a letter of guarantee, the parties should examine the possible impediments that may exist in relation to whether they can actually be granted, especially in the framework of intra-group guarantees. A parent company must, for instance, have a separate corporate benefit in order to grant a guarantee for its subsidiary. It is advisable to have such issues of validity examined by a lawyer (and/or covered by a legal opinion).
THIS AGREEMENT IS MADE AND ENTERED INTO
between
______, a company incorporated and existing under the laws of ______with its registered office at ______[address] and registered with ______in ______under number ______(the “Guarantor”)
and
______, a company incorporated and existing under the laws of Belgium, with its registered office at ______[address] and registered with RPR/RPM in ______[judicial district] under number ______(the “Beneficiary”);
in the presence of
______, a company incorporated and existing under Belgian law, with its registered office at ______[address] and registered with RPR/RPM in ______[judicial district] under number ______(“the Borrower”).
The Guarantor and the Beneficiary are hereinafter collectively referred to as the “Parties”.
WHEREAS the undersigned Guarantor holds a share of ______per cent (______%) in the Borrower and therefore has control over the Borrower within the meaning of the Belgian Company Code;
WHEREAS the undersigned Guarantor is fully aware of the terms and the conditions of the ______[title and date of agreement] (the “Agreement”) concluded by the Beneficiary with the Borrower and agrees on such terms and conditions[1];
NOW, THEREFORE, the undersigned Guarantor undertakes to the Beneficiary the following:
Article 1 – Object of the Guarantee
The Guarantor will pay any and all sums due, or to become due, by the Borrower to the Beneficiary, under or in connection with the Agreement, whether as principal, interest or otherwise, and which have not been paid by the Borrower at the time that such demand is made.
Any demand for payment under this Guarantee must be sent by registered mail to the Guarantor.
The registered letter containing the demand under the Guarantee must specify any and all amounts due to the Beneficiary by the Borrower (whether as principal, interest or otherwise) and which have not been paid by the Borrower at the time that such demand is made.
Article 2 – Waivers
The Guarantor hereby waives:
(a)the benefit of division (“voorrecht van schuldsplitsing/bénéfice de division”)[2];
(b)the benefit of execution (“voorrecht van uitwinning/bénéfice de discussion”)[3];
(c)the benefit of article 2037 of the Civil Code (“exceptio subrogationis”);
(d)any subrogation of the rights of the Beneficiary until all sums due by the Borrower have been paid in full. Any such right of subrogation under this guarantee shall be subordinate to any and all rights that the Beneficiary may have against the Borrower;
(e)the right to demand rescission of this guarantee or to the release of the guarantor if, for any reason whatsoever, payment made to the Beneficiary would not be valid or has to be refunded; and
(f)the possibility to claim the benefit of any delay granted to the Borrower.
Any future modification of any term of the Agreement including extensions of maturity or renewals thereof shall not alter any of the obligations under this Guarantee.
Without limiting the generality of the foregoing, the Guarantor’s obligation hereunder is to pay the obligations of the Borrower in full when due according to their terms, and shall not be affected by any extension of time or by any bar as to the enforceability of the obligations.
This Guarantee co-exists with any other guarantee or other security given for the obligations under the Agreement. This Guarantee continues to exist for its full amount even after the realisation of the other securities. Furthermore, the granting or addition of any new security or guarantee to this Guarantee, shall in no respect whatsoever, alter the obligations of the Guarantor under this Guarantee.
Any release of this Guarantee is null and void and without effect if any payment received by the Beneficiary and accepted in satisfaction of all or part of the guaranteed amounts (i) is avoided or declared invalid as against the creditors of the maker of such payment, or (ii) becomes repayable by the Beneficiary to a third party, or (iii) proves not to have been effectively received by the Beneficiary.
Upon making payment in full under this Guarantee, the Guarantor shall be conferred all the rights as payee against the Borrower.
Article 3 – Representations and Warranties
3.1.The Guarantor represents and warrants that:
(a)it is a corporation duly organised under the laws of the jurisdiction of its incorporation and is duly qualified to conduct business wherever necessary to carry on its operations;
(b)the making and performance of this Guarantee is within the Guarantor’s corporate powers, has been duly authorised by all necessary corporate action, has received all necessary governmental and regulatory approvals, if any, and does not contravene the Guarantor’s charter or articles of association or any contractual restriction binding the Guarantor[4];
(c)this Guarantee when executed will be a valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganisation, moratorium, fraudulent conveyance, or other similar laws from time to time in effect and affecting the enforceability of rights of creditors generally.
3.2.The Guarantor further represents and warrants that it is fully aware of the terms and conditions of the Agreement and undertakes insofar as they concern the Guarantor to comply with the undertakings laid down by these terms and conditions.
Article 4 – Duration
This Guarantee shall remain in full force and effect and be binding upon the Guarantor, its successors and assigns until payment in full is made by the Borrower to the Beneficiary.
Article 5 – Miscellaneous Provisions
5.1.This guarantee contains the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes and replaces all prior agreements or understandings, written or oral, with respect to the same subject matter that are still in force between the parties.
5.2.Any amendment to this guarantee, as well as any additions or omissions, can only take place when agreed in writing with the mutual consent of both of the parties.
5.3.Neither party shall assign or transfer any of its rights or obligations under this guarantee, in whole or in part, to any third party without the prior written consent of the other party. Any such assignment or transfer without the prior written consent of the other party shall be deemed null and void.
5.4.“Guarantor” as used in this Guarantee shall include any other corporation into or with which the Guarantor has been merged, consolidated, reorganized or otherwise combined or absorbed.
5.5.Whenever possible, the provisions of this guarantee shall be interpreted in such a manner as to be valid and enforceable under the applicable law. However, if one or more provisions of this guarantee is found to be invalid, illegal or unenforceable, in whole or in part, the remainder of any such provision and of this guarantee shall not be affected and shall continue in full force and effect as if such invalid, illegal or unenforceable provision had never been contained herein. Moreover, if the parties decide to amend the invalid, illegal or unenforceable provision(s) or any part thereof and/or agree on a new provision, they should take care that the new or amended provision embodies as closely as possible the purpose of the invalid, illegal or unenforceable provision(s).
5.6.Neither party shall be held liable for failure to perform under this Guarantee (save for the payment of any sums due hereunder) if such failure is due to causes beyond its reasonable control (“overmacht/force majeure”), such as, but not limited to, fire, flood, strikes, labour disputes or other industrial disturbances, (declared or undeclared) war, embargos, blockades, legal restrictions, riots, insurrections, governmental regulations or the unavailability of means of transport.
5.7.Except by written amendment, waiver, consent, release or termination of this Guarantee, no failure on the part of the Beneficiary to exercise, and no delay in exercising any right, remedy or power hereunder or with respect to the Agreement shall operate as a waiver thereof, nor shall any course of dealing or single or partial exercise by the Beneficiary of any right, remedy or power hereunder or with respect to the Agreement preclude any other or future exercise of the same or any other right, remedy or power.
5.8.If one party has expressly waived a right in writing following a specific failure by the other party, this waiver cannot be invoked by the latter party in favour of a new failure, similar to the previous one, or to any other failure.
5.9.All notices and other forms of communication required under this guarantee must be in writing and delivered or transmitted to the recipient in person through a reputable courier service or by registered mail (with acknowledgement of receipt) to the address indicated below:
To the Guarantor: ______
To the Beneficiary: ______
A notice shall be considered delivered to the recipient’s address on the date of delivery if delivered in person, or 3 working days following the date of mailing if sent by registered mail.
Either party may change the address to which notices are to be delivered or transmitted by giving the other party written notice to this effect in the manner set forth herein.
Article 6 – Applicable Law and Jurisdiction
6.1.All issues, questions and disputes concerning the validity, interpretation, enforcement, performance or termination of this guarantee shall be governed by and construed in accordance with Belgian law, and no effect shall be given to any other choice of law or any conflict-of-laws rules or provisions (Belgian, foreign or international) that could cause the laws of any jurisdiction other than Belgium to be applicable.
6.2.Any dispute concerning the validity, interpretation, enforcement, performance or termination of this guarantee shall be submitted to the exclusive jurisdiction of the ______[judicial district] courts.
Executed in ______[place], on ______[date], in three original copies[5], each party acknowledging receipt of one.
FOR AND ON BEHALF OF THE GUARANTOR
______[name]
______[title]
______[date]
______[signature]
FOR AND ON BEHALF OF THE BENEFICIARY
______[name]
______[title]
______[date]
______[signature]
FOR AND ON BEHALF OF THE BORROWER
______[name]
______[title]
______[date]
______[signature]
1
[1]For sake of completeness or proof, it is advisable to attach the agreement referred to in this recital to the Guarantee Agreement.
[2]See article 2026 Belgian Civil Code.
[3]See article 2024 Belgian Civil Code.
[4]Particular attention should be given to impediments for granting a guarantee, such as the principles of legal speciality, corporate benefit, corporate purpose, the ultra vires doctrine and the forbidden financial assistance rules (art. 629 Belgian Company Code). Other restrictions may result from contracts such as credit facility agreements (e.g. negative pledge provisions). It is advisable to have these issues examined by a lawyer prior to entering into a contract.
[5]Since it is sometimes maintained that a guarantee is a unilateral undertaking, it is also possible to execute only one original by the Guarantor, which will then be handed to the Beneficiary. We prefer to construe a guarantee as a contractual instrument.