Cross Company Guarantee Agreement

If the loan is too large for a company to guarantee, several related companies may offer to cover a proportionate portion of the total loan. If the debtor is unable to make the agreed repayments, each of the guarantors is responsible for executing the repayment of the loan. When designing the guarantee contract, it is customary to introduce an opt-out clause in order to confer an additional advantage on the lender. In such cases, the courts may favour the lender by interpreting the agreement as a compensation loan, which makes them unfavourable from the guarantor`s point of view. The ability to grant cross-guarantees should be based on the rate of the companies` statutes. If the directors are the beneficiaries of the guarantee, the shareholders` agreement may be required….

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