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The guarantee, and the guarantee given free of charge in particular
A guarantee (suretyship) is a person’s undertaking (the guarantor) to secure another’s debts (the debtor) for the benefit of a creditor. If the debtor defaults, the creditor, which may be a bank, may call on the guarantor to pay what the debtor fails to pay. A guarantee may be given free of charge. Article 2043bis of the (old) Civil Code defines it as the act by which a natural person gratuitously secures a principal debt for a creditor; the gratuitous nature relates to the absence of any economic advantage, direct or indirect, that the guarantor may obtain from the guarantee.
The economic interest, for a guarantor, in being recognised as acting free of charge lies in the possibility, on the statutory conditions, of obtaining a full discharge of personal obligations towards the creditor on the principal debtor’s bankruptcy, under Article XX.176 of the Code of Economic Law. That article allows a natural person who gave a gratuitous personal security to apply to the insolvency court to be discharged, wholly or partly, if at the opening of the procedure the obligation is manifestly disproportionate to repayment capacity, assessed against both assets and income. It is not enough for the gratuitous character to be shown; the guarantor’s obligation must also be manifestly disproportionate to repayment capacity.
Recent Belgian case law on the gratuitous guarantee
While proportionality is assessed on the facts, the Brussels Court of Appeal often has occasion to restate the contours of the gratuitous character.
A courtesy guarantee by two company directors. A brother and sister guaranteed a credit to the company whose sole shareholder was their father, but had also accepted a director’s mandate. They said they had been appointed as a courtesy to their father and had received no remuneration or benefit. Such elements are inoperative. The gratuitous nature consists in the guarantor deriving no economic advantage, directly or indirectly, from the security. It is not enough that no specific consideration was stipulated: the court must ask whether, in concreto, the guarantor derived, intended to derive or was likely to derive, directly or indirectly, an economic advantage from the guaranteed claim. This is assessed at the time the security is given, not afterwards by reference to whether the objectives materialised; a mere potential advantage available at that time suffices.
A straw-man manager who signs a guarantee. In another judgment, the court held that these principles do not prevent the court from analysing, in each concrete case, the possibly gratuitous character. A company manager had guaranteed the company’s obligations but explained that his mandate existed only on paper, he being a mere straw man, as confirmed in another judgment. The court held that, when committing, the guarantor sought no direct or indirect economic advantage, stressing that he was neither a partner, nor an employee, nor remunerated for his mandate, and had in concreto no particular interest in the bank granting the credit. Absent concrete proof from the bank of a non-gratuitous guarantee, it granted a partial discharge.
The guarantee by a company director’s spouse. The same court held, regarding a person who guaranteed the obligations of her husband’s company, that since the guaranteed credit was to benefit that company, the benefit of its activity was assumed to profit the whole family, including the guarantor, even though she was a stranger to the company. The guarantee could not therefore be considered gratuitous.
This article is a translation. Only the French version is authoritative. It is provided for information purposes and does not constitute legal advice.
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