A parent company guarantee is one type of what is known as ‘personal security’, in the same way as letters of comfort, suretyships and so called 403 declarations (i.e. a statement of joint and several liability issued by a parent company, when this company issues consolidated accounts). Each type of personal security has its own particular features and as such, it is suitable to a greater or lesser extent if a parent company is asked to provide security for fulfilment of its subsidiaries’ obligations. For example in the event a subsidiary company is ‘thinly’ capitalised and the counterparty demands security for the fulfilment of the relevant obligations.
Legal assistance in parent company guarantees
At Ploum, our experts can advise you on parent company guarantees. We can also investigate whether a certain company is authorised to issue a parent company guarantee, and we can declare this guarantee to be legally valid in the legal opinion that often accompanies parent company guarantees in practice.
Would you like to find out more?
If you have any questions concerning parent company guarantees or suretyships, please do not hesitate to contact one of the members of our Banking Law and Finance Team.