The Civil Code defines a personal guarantee under Article 2021: "A person who acts as a guarantor for an obligation subjects themselves to the creditor to fulfill that obligation if the debtor fails to fulfill it themselves."
Thus, the acquirer of a company commits to repaying the bank from their personal assets in the event of default by the company. It is therefore not a mere moral guarantee, but a genuine commitment to pay in place of a debtor who is no longer able to meet their obligations. Furthermore, the guarantee agreements drafted by banks are highly restrictive—terrifying, even. And renegotiating this text is unusual. The business owner often feels as though a knife is being held to their throat, imagining the absolute worst...
There are nevertheless certain points that can be discussed with banks, which can significantly ease the fears of the owner-acquirer.
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Amount. The guarantee does not have to match the total credit amount. It can be capped at a reasonable sum, proportional to the acquirer's personal wealth. The goal is often to demonstrate genuine commitment to the bank, rather than guaranteeing 100% of the granted credit.
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Duration. Banks generally offer to consider releasing the guarantee after a few years, depending on smooth repayment and performance metrics. While this proposal is not always very convincing, it is entirely possible to agree in advance that the guarantee will be time-limited. In a company acquisition, the primary risk indeed lies in the first few years.
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Decreasing scale. Along the same lines, the guarantee can be structured on a sliding scale that decreases in line with the bank repayment schedule.
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Non-involvement of the spouse. The bank may ask for the spouse's signature to acknowledge awareness of the guarantee. This does not mean the spouse's personal assets are committed; by default, they remain out of reach, unless the guarantee is granted jointly by both spouses. The choice of matrimonial regime is therefore of paramount importance.
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Division and benefit of discussion. By law, the lender must divide its claim among the different guarantors, provided there are multiple. It cannot claim the entire sum from a single guarantor. Furthermore, the lender must first pursue the primary debtor before turning to the guarantor. Thus, an acquirer can only be called upon if the holding company that contracted the loan defaults. Note that these two principles are often undermined when the bank requires the guarantee to be "joint, several, and indivisible."
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Unseizability of the primary residence. A law (April 25, 2007) allows self-employed individuals—and more recently company directors (May 8, 2009)—to safeguard their primary residence. In practice, the acquirer of a company must make a notarized declaration prior to acting as guarantor for it to be enforceable against third parties. However, caution is required, as the bank may not agree to grant the loan if the guarantee is thus stripped of part of its substance. It is therefore essential to take this step with full transparency.
Relying on a personal guarantee is useful because it facilitates access to credit. While there is generally little room for negotiation regarding the exact wording of the guarantee text, parameters such as the amount, duration, or decreasing scale can be negotiated. Protecting the primary residence from seizure is a legal mechanism that allows part of one's personal assets to be safeguarded.
Illustration: Clou
