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Drafting a suretyship loan agreement involves describing a single specific loan, setting a maximum amount, specifying the nature of the obligation (suretyship and non-joint and several liability), and having the surety and their spouse sign. These four points determine whether the document holds up. Sureties rarely fail due to the content of the loan, but rather due to a missing signature from the partner or an unspecified description of what the surety is liable for.
The short answer
- Link to a single loan: parties, date, principal, interest, and repayment schedule of the loan agreement.
- State a maximum amount: expressed in money, including or excluding interest and costs.
- Deliberately choose the form: suretyship (Art. 7:850 BW) or joint and several liability, and write it down as such.
- Regulate the order of action: when may the lender call upon the guarantor and after which notice of default.
- Have the spouse co-sign: without consent, the guarantee is voidable (Articles 1:88 and 1:89 of the Dutch Civil Code).
Drafting a surety loan agreement: the core of the document
Suretyship is the agreement whereby the surety undertakes towards the creditor to fulfill an obligation of a third party (Art. 7:850 BW). The document therefore involves two parties: the lender and the surety. The borrower merely signs to acknowledge receipt. This determines how the agreement is structured and who makes which declarations.
In any case, include:
- Parties: lender and guarantor, with full name, address and, for legal entities, the Chamber of Commerce number.
- The underlying loan: reference to the loan agreement with date, principal, interest rate, term and repayment schedule.
- Scope of the suretyship: the maximum amount, and whether or not interest, extrajudicial costs, and legal costs are covered by it.
- Moment of contact: after which default by the borrower and after which written notification the guarantor can be held liable.
- Duration and termination: the suretyship ends upon full repayment; specify when the lender confirms this.
- Duty to inform: the lender notifies the guarantor in a timely manner that the borrower is in default.
- Recourse and recovery: the relationship between guarantor and borrower (Art. 7:866 BW), and in the case of multiple guarantors, the mutual division.
- Spouse's consent: a separate, signed consent form.
Determineability and the maximum amount
Suretyship is a dependent right: it depends on the obligation for which it was entered into (Art. 7:851 BW). If the loan is repaid or the claim against the borrower becomes time-barred, the surety's obligation also ends (Art. 7:853 BW). Precisely for this reason, it must be clear which obligation is covered. A suretyship for “all current and future claims” is permitted provided there is sufficient determinability, but is very unfavorable for the surety: he is then also liable for financing that did not yet exist at the time of signing.
Moreover, a strict requirement applies to a private suretyship. If the amount of the obligation is not fixed at the time of entering into the agreement, the suretyship is only valid insofar as a maximum amount expressed in monetary terms has been agreed upon (Art. 7:858 BW). This provision cannot be deviated from to the detriment of the surety (Art. 7:862 BW). Even if you believe that the private arrangement does not apply, a maximum amount is advisable: it prevents disputes regarding interest and collection costs that continue for years.
Be explicit whether interest and costs fall within or outside the maximum. A guarantee of €100,000 that increases to €130,000 with interest and costs will otherwise lead to a dispute.
Suretyship, joint and several liability, or guarantee: choose wisely
This choice determines the entire position of the guarantor and should therefore be made consciously.
- Suretyship: subsidiary. The surety is not obliged to perform until the principal debtor defaults (Art. 7:855 BW) and may invoke the latter's defenses (Art. 7:852 BW).
- Joint and several liability: the co-debtor is personally liable for the entire amount (Art. 6:6 BW) and can be held directly liable, even without default by the company.
- Independent guarantee: a separate obligation, independent of the loan. In principle, the guarantor pays upon first request and cannot use defenses arising from the underlying relationship.
The wording is not decisive. What is decisive is what the parties have agreed upon and how they could reasonably understand each other's statements. Anyone who has a director-major shareholder sign as a joint and several debtor for a loan that is exclusively entered into by the BV effectively creates security for the debt of another party. This simply brings Article 1:88 of the Dutch Civil Code into play. Therefore, choose the form you intend and formulate it consistently throughout the entire document.
Private guarantee and the director-major shareholder exception
The law protects the private guarantor with mandatory provisions. In addition to the maximum amount, the suretyship against the private guarantor can only be proven by means of a written document signed by him (Art. 7:859 BW), and a suretyship for future obligations without a term may be terminated by the guarantor (Art. 7:861 BW).
The exception in Article 7:857 of the Dutch Civil Code is decisive for SMEs. There is no private suretyship if the surety acts in the exercise of his profession or business, or if he is a director of a public limited company (NV) or private limited company (BV) and holds the majority of the shares alone or with his co-directors, and the suretyship is entered into for the benefit of the normal conduct of the business of that company. A director-major shareholder who co-signs for ordinary working capital financing falls under this. Conversely, a minority shareholder or a non-director falls outside of this and does enjoy the protection. Therefore, when drafting the agreement, specify in what capacity the surety signs and for what purpose the loan is used.
The spouse's signature
This is the most common mistake. For a guarantee or joint and several liability for the debt of a third party, the consent of the spouse or registered partner is required, unless this occurs in the normal course of the guarantor's own profession or business (Art. 1:88, paragraph 1, sub c, Dutch Civil Code). If such consent is lacking, the other spouse may annul the guarantee (Art. 1:89 Dutch Civil Code).
The exception in Article 1:88, paragraph 5 of the Dutch Civil Code imposes two cumulative requirements: the guarantor is a director of the public limited company (NV) or private limited company (BV) and holds the majority of the shares, either alone or with co-directors, and the legal transaction is performed for the benefit of the normal conduct of the business of that company. That second criterion is interpreted strictly. A loan for an acquisition, a real estate purchase, or a refinancing in financial distress by no means always falls under it.
Practical solution when drafting: include a consent block with the partner's name, date, and signature by default, even if you believe the exception applies. It costs one line and eliminates the biggest risk. Additionally, request a statement regarding marital status so that it is clear afterwards why a partner's signature is or is not included.
Brief practical example
A wholesaler borrows €80,000 from a family member for inventory financing. The guarantee refers to “all obligations of the company” and does not specify an amount. When the BV runs into difficulties, it turns out there is also a lease agreement and an overdraft debt. The guarantor believed they were signing for €80,000. A reference to that single loan agreement plus a maximum amount would have prevented the dispute.
Honest recommendation
You do not need a lawyer for a simple, one-off guarantee for a specific loan with a fixed amount and a short term, for example between an entrepreneur and family or between two known parties. In that case, use a reliable template, link it to a single loan agreement, include the maximum amount, and have the partner co-sign. That is sufficient in the vast majority of cases. You also rarely need to have a bank's standard form drawn up yourself.
Do have it drafted or reviewed when the guarantee is broadly formulated and covers future debts, when multiple guarantors need to arrange mutual recourse, when the loan is linked to an acquisition or refinancing, or when it is uncertain whether Article 7:857 and Article 1:88 paragraph 5 of the Dutch Civil Code apply. In those cases, the amounts are large enough to justify a few hours of legal attention.
Read more: what is a surety loan agreement and having a surety loan agreement drawn up. You can arrange this directly via the surety loan agreement.
Frequently Asked Questions
The parties, a reference to the specific loan agreement with principal amount and term, the maximum amount, the moment at which the guarantor can be called upon, the duration, the right of recourse, and the signed consent of the spouse.
In the case of a private suretyship, this is indeed the case if the amount of the obligation is not fixed at the time of entering into the agreement: the suretyship is then only valid insofar as a maximum amount expressed in monetary terms has been agreed upon (Art. 7:858 BW). Even outside that situation, a maximum amount is advisable, certainly for interest and collection costs.
In the case of a private guarantor, the suretyship can only be proven by a written document signed by him (Art. 7:859 BW). In practice, a written, signed guarantee is therefore always the norm, even for a business guarantor.
For the lender, joint and several liability is more favorable, as he can call upon the lender directly without default on the part of the company. For the surety, suretyship is more favorable due to the principle of subsidiarity (Art. 7:855 BW) and the ability to invoke defenses (Art. 7:852 BW). Choose wisely and formulate consistently, as the title of the document is not decisive.
This is possible if the obligations are sufficiently ascertainable, but it is unfavorable for the guarantor. Moreover, a private guarantor can terminate a suretyship for future obligations without a final date (Article 7:861 of the Dutch Civil Code). Linking it to a single concrete loan provides both parties with greater clarity.
As a rule, yes; otherwise, the guarantee is voidable (Articles 1:88 and 1:89 of the Dutch Civil Code). Consent is not required only if the guarantor is a director and holds the majority of the shares alone or with co-directors, and the loan falls within the normal course of business (Article 1:88, paragraph 5, of the Dutch Civil Code). Include the consent block by default.
Specify whether each guarantor is liable for the whole or for a part, and what the mutual obligation to bear the burden is if only one guarantor pays. Without an agreement, the distribution follows from the statutory rules regarding joint and several liability and recourse (Art. 7:866 BW), and this often leads to disputes between partners.
