What is a Cross Corporate Guarantee Sample?

A cross guarantee is an arrangement between two or more related firms to provide reciprocal guarantees for each other's liabilities, fulfillment of promises or obligations. This guarantee is agreed upon among related companies, such as groups of companies or a parent company and subsidiaries and affiliates.

What Should I Remember About A Cross Corporate Guarantee?

The place where cross guarantees become cross border guarantees might invite scrutiny of regulators of different countries. Cross guarantees must be disclosed under contingent liability, along with lawsuits and warranties with the balance sheets. Sometimes implicit cross guarantee may be implied merely by the passive association of a firm with a firm of global or regional reputation, and a higher credit rating may result from this situation. While drafting the guarantee agreement, it is customary to include a clause of indemnity to give additional advantage to the lender. In such cases, the courts may favor the lender by interpreting the agreement as an indemnity bond, which makes it unfavorable from the guarantor’s point of view. The capacity to give cross guarantee should be based on the article of association of the firms. If the directors are the beneficiaries of the guarantee, then the shareholders' approval may be required. The lender can enforce a guarantee even if the security of principal borrowers’ assets is held by him.

Sources-https://www.divestopedia.com/definition/4927/cross-guarantee