If you take out a company loan, you may need to use certain security features. One of them is a surety. What exactly is the surety of a company loan and what should a lender and guarantor remember?
A surety is a contract in which a third party collects the debt if the debtor does not do it in a timely manner. Therefore, a creditor, for example a lender, may request repayment from the guarantor.
Most often we deal with the so-called joint and several obligation. This means that unless the contract states otherwise, the creditor may demand that the debtor and the guarantor pay the obligation.
You can find detailed information about the surety in the Civil Code. Under the law, the surety agreement is a declaration of will of the creditor and the guarantor. The debtor is then not one of the parties to this contract.
In order for the guarantee contract to be valid, it is necessary to submit a declaration of intent in writing by the guarantor. The creditor then accepts a written statement from the guarantor. Conclusion of a surety agreement does not require additional official activities, for example, signing at a notary’s office.
When the guarantor is responsible for paying off the debt?
The guarantor is obliged to settle debts when the debtor has not repaid his obligations on time. To create the liability of the guarantor, usually no additional notice is needed.
When the creditor informs the guarantor about the fact that the debtor has not settled the obligation, the guarantor is liable for both repayment of the debt and interest, which is counted from the moment of summoning the guarantor to settle the debt.
If the debtor settles the debt on time, the surety agreement signed earlier expires. The creditor does not have to inform the guarantor about the repayment – however, it is worth entering such an obligation into the surety agreement. The debtor should also inform the guarantor that he has returned his loan or other indebtedness.
Expiry of the limitation period
The creditor can demand that the guarantor repay the debt even when it is time-barred. Nevertheless, in such a case the guarantor does not have to pay back the debt – it is then necessary to invoke the limitation period.
It is worth remembering, however, that the guarantor may even be entered in the economic information office, in the so-called debtors’ register.
Withdrawal of the surety
Exercising the right to withdraw a surety is possible only in selected cases.
This is possible when the contract is terminated with the consent of the parties, i.e. both the creditor and the guarantor. Another case is the withdrawal of the surety even before the indebtedness. The last case of withdrawal from the guarantee concerns the case when the debt has no fixed repayment date. After six months from the surety granted, the guarantor may demand that the creditor call for the debtor to pay the debt. If the creditor does not call the debtor, then the surety agreement expires.
- Guarantee agreement
- Expiry of the limitation period
- When the guarantor is responsible for repayment