Business bond: how to avoid the worst – Business loans

In case of manager’s failure, family and friends may be at risk

In case of manager

A wealthy aunt who is reduced to living from the RMI, a sacrificed family home, the future of children mortgaged, friends in debt and lost forever…

Supporting the development of a company by standing surety means accepting to live with a sword of Damocles over your head. The entrepreneur nevertheless has little choice. “The vast majority of professional credit files (70%) is systematically accompanied by a request for a deposit,” says Éric Bachou, of Siagi (Interprofessional Interprofessional Society of Real Estate Guarantee). While the banker has legal obligations, including a duty to inform, these are rather reduced (see page 51). Orally, bankers want reassurance. “To bring the head of the company or one of his relatives to sign the act of suretyship, the banker does not hesitate to lower the scope of his gesture,” complains Jacques Poindron, Afub (French Association bank users). Of course, as long as the company pays its creditors, the risk is virtual. However, if it can not cope with its deadlines, the deposit can lose everything. Depending on the scope of the deed signed, all its assets and all its current income, but also future, will be used to settle the debts of the company. Hence the need to know the different types of securities offered, and to include in its contract clauses designed to limit damage. In practice, the banker will issue standard documents and will be reluctant to discuss. Know how to resist: every word counts Personal deposit: the precautions to take before and after the signature.

In order to obtain a loan, the manager of an SME must provide his personal guarantee, that is to say, be himself a surety for his own property. Unless you have an exceptional record, few bosses can escape this requirement. Indeed, if the personal surety is obviously used to amortize the risk incurred by the bank, it is also a proof of the manager’s confidence in his own business. Before signing a bond on your own property, it should nevertheless not remain in the vagueness on its counterpart. For ignoring this precaution, Arthur C, boss of a hardware company, had to put the key under the door. His banker had promised him orally to increase his line of overdraft provided he is a surety. But once the bond agreement was signed, the bank came back on that promise. To oblige the banker to honor his commitments, but also to provide proof in the event of an abusive breach of credit, it should be specified in the act that the validity of the bond is linked to the obtaining of such a loan or the financing of the loan. such an operation.

After the signing of the contract, the manager must not forget the potential danger of his surety, even if his business is successful. Thus, in 1997, Robert M. sells his transport company, then flourishing. 4 years later, the company filed for bankruptcy. The bank turned against Robert M. and asked for 2 million francs (about 304,900 euros). Could he have prevented this situation? Yes, by the introduction of a clause binding the bond to his duties as an officer or to his status as a partner. In this case, when the company is sold, the formalities are simplified: the surety sends the banker a letter notifying him of his cessation of activity or the sale of his shares, and asks him to cancel his deposit. But in the absence of such a clause, simply terminating is not enough. The surety must obtain a letter from his bank permanently unloading it, which it is not obliged to do.

Often, in addition to personal surety, the banks ask the leader the surety of a relative (spouse, collateral parents, friends…).

The joint and several guarantee commits you even if the debtor is solvent.

The joint and several guarantee commits you even if the debtor is solvent.

Here too, it is important to understand the risks before signing. The bankers favor the joint guarantee to the simple surety. The reason? The joint surety deprives the signatory of what is called the “benefit of discussion” and the “benefit of division”. Clearly, it allows to return directly against the bond, without having to prosecute beforehand the principal debtor, and this, even if it is solvent. In addition, in the event that several people have surety, the bank may decide to pursue only the surety that it believes is best able to pay the full debt. It is therefore preferable to opt for the simple deposit, which the bank rarely accepts. But, depending on your margin of negotiation, try to impose your will, especially in case of plurality of securities.

The “omnibus” deposit amounts to signing a blank check to the bank.

The "omnibus" deposit amounts to signing a blank check to the bank.

Generally when a company opens a checking account, the bank requires a bond “all commitments”, commonly called “omnibus”. This means that the guarantor then agrees to pay any sums that the company may owe the bank, regardless of their origins, present and future. 

In 1975, she was a surety, without limitation, for a small grocery store. 25 years later, the trade has become a major international trading company. But, as a result of a setback, it has just been put into liquidation. Result: the creditors claim… 10 million francs (1 524 490 e) to Viviane To avoid signing a blank check to the bank, a few words are enough. Specify how high your commitment is. Example: “Up to the amount of 100,000 F”. “It is always better either to specify the allocation of the bond to a transaction or specific financing, or to limit the scope of the bond to the value of a property of its heritage,” said Dominique Legeais, professor of law in Paris V. Other possible guardrail: provide for the cancellation of its surety in case of transformation of the company (SARL in SA, for example), change of activity, departure of the manager… Fixed-term or indefinite guarantee “Contrary to popular belief,” says Jacques Poindron, of the Afub, the guarantee of indefinite duration is more favorable to the entrepreneur or his relatives. Indeed, a bond of indefinite duration can be revoked at any time, by letter sent by registered letter, with acknowledgment of receipt. A very appreciable flexibility for spouses, in the event of divorce, in particular. Caution The guarantor remains liable for the debts of the debtor born before the revocation.

On the other hand, a commitment for a fixed period must be held until the scheduled term, even if the situation of the surety has changed (divorce, resignation, transfer of company, etc.).

The spousal surety is often necessary. Bankers are rarely satisfied with the only guarantee of the sole entrepreneur and also claim that of the spouse. This also enables them to obtain collateral for community property (for married couples under the community regime), or all the couple’s property, including the spouse’s own property (see box on page 50). In negotiation with the bank, try to preserve your spouse as much as possible, either by obtaining that he is not called on bail, or by limiting the scope of his commitment to a single property. As such, be aware that even if your spouse simply writes and signs at the bottom of the personal guarantee deed “good for consent” (article 1 415 of the Civil Code), this allows the banker, the day come, to seize all property acquired in common, in addition to your own property. Some business leaders opt for the separation of property regime, thinking to save some of their assets from creditors, in particular bankruptcy. “Attention If the couple does not keep a strict accounting of its acquisitions, it creates a common property community that can be called as a guarantee,” warns Me Marc Saint-Cène, a lawyer in Paris.

In addition, when the entrepreneur mobilizes his personal resources to build a patrimony in the name of his wife, the banker, not fooled, will be able to request in the courts the restitution of these goods, on the grounds of their “requalification in own property of the manager”.

You can limit the deposit by offering other guarantees.

You can limit the deposit by offering other guarantees.

In addition to negotiating the terms of the contract signed with the banker, the entrepreneur can also offer other guarantees to limit the scope of the deposit. It can be factoring (transfer of receivables to a collection agency) on accounts receivable, collateral (pledge) of goodwill, machines, goods… If the bank considers that your request is too much risky, you can also suggest that you use the Sofaris guarantee (see box on page 52).

By the end of the year, Siagi, a mutual guarantee company, managed by chambers of crafts, should release a product, called Care (light deposit of the head of the company), which deserves the attention. Its principle? Siagi will intervene in place of the personal guarantee of the manager, or another natural person, within the limit of 50% of the amount of the credit. On the other hand, if a financial institution offers you to take out an “independent”, “first demand” or “stand-alone” guarantee, linked, for example, to a financial leasing transaction, beware “These commitments imply that you give up Dominique Laweais warns you that, unlike a guarantor, you are obliged to pay at the “first request” of the bank, that is to say immediately, only then can you make an appeal before Justice.”

A word of advice, therefore, if you go through the contract and read: “I am irrevocably and unconditionally guarantor at first request…”, refuse the offer without hesitation.

When the bank “activates” the bond, the riposte is difficult. In case of failure of the company, the fate of those who have endorsed is unenviable. The courts are not very kind to the entrepreneur, known as “knowledgeable” in business. “But even for the laypersons, the room for maneuver is narrow, says Marc Saint-Cène.It is not necessary to delude ourselves on the success rate of the litigations engaged by unlucky sureties, it remains excessively weak.” Unless the bank proves in court that the bank has a procedural flaw with far-reaching consequences, or is deliberately reckless, the surety is often forced to pay his or her due. laurence ollivier

Measure the commitment made by the spouse

Measure the commitment made by the spouse

Take the example of Michel who needs financing for his business. His bank asks him for his bail, but also the commitment of his wife. If Michel is surety and Virginia gives his consent, he commits his own property and those in community, but Virginia preserves its own property. If Michel and Virginie are each guarantor: they engage their only property. On the other hand, if the spouses stand surety and give their crossed consent: all their own and common property are engaged. Be careful, when Michel and Virginie sign a bond, depending on the nature of the act, they must understand the scope of their commitment. So when Michel is surety for 655 957 F (100 000 €), with the consent of Virginia: the total commitment is 655 957 F. But in the case where Michel and Virginie stand surety for 655 957 F (100,000 €): the total commitment is 655 957 F x 2 = 1 311 914 F (200 000 €).

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