Parent company guarantees

A parent company guarantee (PCG) is a guarantee given by one contracting party's ultimate or intermediate holding company in favour of the other contracting party to secure the performance of that party's obligations under the contract.

When would a PCG be used?

In construction, parent companies most commonly give guarantees to bolster the financial credibility of their subsidiary companies. If one of its subsidiaries has entered into a commercial contract with a third party, that third party may want to ensure the performance of the contract and will look to other companies within the same group to give a financial or performance guarantee in respect of those obligations. It gives an extra level of comfort in respect of the obligations which that subsidiary company has undertaken to perform. See Practice Note: Parent company guarantees (PCGs) in construction.

PCGs are commonly used by employers to give them protection in the event of contractor default. This protection will cover the employer if the contractor breaches the building or engineering contract or, in most circumstances, upon the contractor's insolvency. In construction, PCGs are commonly issued by the

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

Powered by Lexis+®
Latest Construction News

Construction weekly highlights—24 July 2025

This week's edition of Construction weekly highlights includes the Court of Appeal (CoAs)’s decision in relation to NHBC Buildmark Choice policies confirming that the cause of action accrues when the insured party ‘has to pay more’ to complete the building work as a result of contractor insolvency (National House Building Council v Peabody Trust), Construction Leadership Council (CLC) guidance on Building Control Approval Applications for new higher-risk buildings, Ministry of Housing, Communities and Local Government (MHCLG) guidance on the Building Safety Levy, MHCLG’s announcement of legal deadlines for landlords to remediate unsafe cladding in social housing, a Royal Institution of Chartered Surveyors (RICS) consultation on it updated cladding valuation standard, a British Standards Institution (BSI) consultation on a new code of practice for bringing safe construction products to the market, a Technology and Construction Court (TCC) decision enforcing an adjudicator’s decision to award the responding party in the adjudication the notified sum (VMA Services v Project One), a CoA decision providing guidance on "costs directly incurred" in a waste management project agreement (Buckinghamshire Council v FCC Buckinghamshire Ltd), an update on the status of the Planning and Infrastructure Bill together with updated guidance from MHCLG on the same, the National Infrastructure and Service Transformation Authority (NISTA)’s interactive Infrastructure Pipeline tool, and publication of the Welsh Government’s circular on updated building control profession standards and codes.

View Construction by content type :

Popular documents