Q&As

Can I safely delete a ‘suspense account’ clause in a guarantee?

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Published on LexisPSL on 16/08/2017

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • Can I safely delete a ‘suspense account’ clause in a guarantee?
  • Summary
  • What is a suspense account clause?
  • The effect of the clause
  • Example 1—no suspense account clause in the guarantee
  • Example 2—suspense account clause in the guarantee
  • Guarantor’s position

Can I safely delete a ‘suspense account’ clause in a guarantee?

This Q&A focuses on the whether or not a ‘suspense account’ clause in a guarantee can safely be deleted when acting for the beneficiary of a guarantee.

Summary

If a guarantor requests that a ‘suspense account’ provision in a draft guarantee should be removed it is normally better for the beneficiary of the guarantee to refuse the request and explain why the suspense account is needed. A suspense account provision can help a beneficiary maximise its recoveries from one or more guarantors without imposing any greater liability on them.

What is a suspense account clause?

For an example of a suspense account provision see clause 8 Credit to a suspense account of our Precedent: Guarantee and indemnity: cross guarantee from group companies—bilateral—all monies. The recommended forms of facility agreement published by the Loan Market Association (LMA) contain similar provisions; see for example clause 18.6 Appropriations of the LMA Multicurrency Term and Revolving facility agreement available to LMA members on the LMA

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