Director’s guarantee

This guidance note explains the use of director’s guarantees in financing transactions, and answers the question “when and why do lenders require director’s guarantees?”

A corporate borrower often has multiple directors, and it is common for the lender to require a director’s guarantee from each of the directors. This guidance note summarises in table form the basis of the director’s liability to the lender, being joint, several, or joint and several.

Other matters that this guidance note covers include:

• • key considerations for the lender and the director when entering into a director’s guarantee; and
• • tips for legal practitioners when advising directors regarding director’s guarantees.

See Director’s guarantee.

Performance guarantee

This guidance note explains the use of performance guarantees in financing transactions. References are made to case law to aid legal practitioners’ understanding on a range of relevant matters, including what is the guaranteed obligation, and imposing conditions on a performance guarantee.

This guidance note includes example wording for a performance guarantee that legal practitioners may use.

See Performance guarantee.

Demand guarantee

This guidance note explains what is a demand guarantee, and the use of demand guarantees in financing transactions. Legal practitioners will also find commentary detailing the parties to a demand guarantee and the roles they play.

This guidance note includes example wording that legal practitioners may come across in a contract where there is a requirement on a party to obtain a demand guarantee.

See Demand guarantee.

Bank guarantee

This guidance note explains the use of bank guarantees in financing transactions. Legal practitioners will also find commentary detailing the parties to a bank guarantee and the roles they play.

Other matters that this guidance note covers include key considerations for the issuer and the beneficiary of a bank guarantee, and the application of the autonomy principle in the context of a bank guarantee.

See Bank guarantee.

Cross guarantee

This guidance note explains what is a cross guarantee, parties to a cross guarantee, and whose obligations are guaranteed in a cross guarantee. Among other practical matters, this guidance note also considers cross guarantee in the context of ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.

See Cross guarantee.

Parent company guarantee

This guidance note explains what is a parent company guarantee and the use of parent company guarantees in financing transactions. It also covers key considerations for the lender and the parent company when entering into a parent company guarantee.

This guidance note also outlines important matters for legal practitioners to consider, such as corporate benefit in the context of “downstream” parent company guarantees, and potential tax implications relating to group companies utilising a parent guarantee as a form of credit support for a subsidiary.

See Parent company gurantee.

Standby credits as a form of guarantee

This guidance note explains what is a standby credit and the use of standby credits in financing transactions. It also explains the background and history of standby credits, for example, standby credits were first developed in the US to satisfy US banking law. Outside of the US, it is more common to use a demand guarantee.

Legal practitioners will find commentary detailing the parties to a standby credit and the roles they play.

This guidance note also outlines the potential application of international standards to standby credits that legal practitioners may come across, including ISP 98 and UCP 600.

See Standby credits as a form of guarantee.