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Parent Company Guarantee


This Parent Company Guarantee shall be used where a parent company is guaranteeing and indemnifying the obligations of its subsidiary company under a contract.

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A Parent Company Guarantee is generally required in high value transactions when there are concerns about the creditworthiness of the subsidiary company. Typically where a guarantee is required the entity guaranteeing the obligations will be the subsidiary's parent company or the ultimate holding company of the subsidiary’s group.

This Guarantee is a primary obligation of the parent company to the beneficiary covering the financial obligations of the subsidiary company under a contract with the beneficiary.

Before entering into this Guarantee the parent company must ensure that it has the capacity to enter. The parent company must review its constitutional documents to ensure that it has explicit powers in its constitutional documents to give guarantees and indemnities. It must also take steps ensuring that giving a guarantee will not breach the provisions of any existing financing agreements it has in place, or cause an event of default under any existing agreement.

A Parent Company Guarantee may be executed on the same date or after the contract between the subsidiary company and the party who is the beneficiary of the guarantee is signed. When it is executed on the same date as the contract between the subsidiary company and the party who is the beneficiary of the guarantee it will be as a condition precedent to the contract taking effect.

Before entering into this Parent Company Guarantee there must be either adequate consideration or the document must be executed as a deed in other for it to be valid, this is because a guarantee benefits someone else at the expense of the guarantor. In order to avoid any potential discussion of whether the consideration given was adequate this Parent Company Guarantee requires to be executed as a deed.

This Parent Company Guarantee is in Microsoft Word format, written in plain English, easy to use and edit.

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