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1) A corporate guarantee is an official letter where a guarantor becomes responsible for handling debt payments or takes overall responsibility for debt repayment in case the debtor (tenant) defaults on the execution of a contracts or a lease agreement.
2) The parent corporate guarante (pcg) represents the guarantee released by the parent company in favour of third parties to guarantee the commitments of a subsidiary, and It is a legal agreement between a borrower/debtor, lender/guaranteed, and guarantor (parent company), whereby a corporation (e.g., parent company) takes responsibility for the debt repayment of the borrower/debtor provided it faced bankruptcy or doesn't comply with the main agreement terms.
3) The following parties are involved in a corporate guarantee:
▪ Lessor: who has to be guaranteed for the execution of the contract by the other entity;
▪ Tenant: debtor or who has the obligation to pay monthly.
▪ Guarantor: the parent company who agrees to be liable for the repayment if the Tenant fails to pay.
4) Corporate guaranteed became parent company guaranteed when the guarantor is the parent company pursuant to article 2359 of italian civil code.
As above mentioned, there is a legal presumption (unless proved otherwise) that the direction and coordination of companies is exercised, inter alia, by those companies which control them pursuant to Article 2359 CC. It is therefore important to briefly describe the contents of this and its related provisions.
5) Article 2359 CC contains a definition of controlled companies, which are: (i) those companies where another company has the majority of the votes exercisable in the ordinary shareholders' meeting; (ii) those companies where another company has votes sufficient to exercise a dominant influence in the ordinary shareholders' meeting; (iii) those companies which are under a dominant influence of another company due to particular contractual links with the same.
For purposes of items (i) and (ii) above, the votes exercisable by controlled companies, fiduciary companies and intermediaries are also computed, while votes exercised on behalf of third parties are not.
6) For the guaranteed the following data should be clearly stated in a corporate guarantee:
1. The debtor’s name.
2. Details of the guarantor (e.g., name, contact info, address, etc.)
3. The lessor’s information (e.g., name, address)
4. Statement of any limits to the guarantee (e.g., a maximum amount of being repaid by the guarantor)
6. Statement: at first call and without exception.
It is important to always check the legal names of the guarantor, the lessor, and the tenant in the document.
7) Types of Corporate Guarantees: Corporate guarantees can be limited and unlimited. A limited guarantee means that a guarantor will be liable for the debt of the debtor only to a certain extent.
In Italy in accordance with article 1938 of the civil code only limited guarantee are legal.