Cross-guarantees

[Andy008]

Can anyone define what one of these is for me please?

Thanks.

[echokilo]

This is an intercompany guarantee where many companies agree
to form an allegiance for the purpose of taking a loan or
raising capital. Suitable whether the companies are
subsidiaries of a larger company or if they have their own
separate identities.



This inter company guarantee, sometimes called a cross guarantee, governs the relationship between a group of companies which may either be separate entities, group companies or subsidiaries of a common company. This type of guarantee is typically used for raising capital or talking multiple loans by a corporate-group, where each company within a guarantee group guarantees the performance of the companies.

The companies have joint and several liable for the thing that they are guaranteeing. Joint and several liability means that with respect to the claimant, the parties are jointly liable (both are equally responsible for paying the entire sum and neither one can pay only their half share), but as between obligors themselves, the liabilities are several. This means that if the claimant pursues one party, and receives payment in full, that party can then pursue the other obligors for a contribution to their share of the liability.