Does a guarantee have to be executed as a deed?

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Published on LexisPSL on 28/11/2013

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

  • Does a guarantee have to be executed as a deed?
  • Consideration and shareholders' resolutions
  • What if the parties choose to execute the guarantee as a deed?
  • Executing a guarantee as a deed—practical considerations

Does a guarantee have to be executed as a deed?

No, a guarantee does not have to be executed as a deed. A guarantee can be executed as a deed or as an agreement in English law.

A guarantee does have to be in writing under section 4 of the Statute of Frauds 1677.

However, a guarantee is often executed as an agreement by the guarantor and the beneficiary. In banking practice, the guarantee is often incorporated into the facility agreement which is executed as an agreement. Many lenders taking a guarantee from group companies incorporate the terms within the facility agreement, so all parties sign the facility agreement and, therefore, the guarantee as an agreement. The Loan Market Association facility documentation for investment grade and leveraged transactions is structured in this way.

Consideration and shareholders' resolutions

A guarantee may need to be executed as a deed where there is no apparent consideration or where it is difficult to demonstrate what the consideration is in return for granting the guarantee.

The directors of a company have to comply with the Companies Act 2006 (CA 2006) duties to promote the success of the company under CA 2006, s 72. If there is

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