A director who has personally guaranteed his company’s debts is not defenceless when the bank calls on the guarantee. For guarantees signed since 1 January 2022, the French Civil Code gives him four defences: nullity if the handwritten statement is missing, reduction of his commitment if it was manifestly disproportionate to his income and assets, partial loss of the bank’s rights if it failed to warn him, and loss of interest and penalties if it failed to inform him every year and at the first default. The regime is not the pre-reform one: disproportion no longer releases the guarantor entirely, it only reduces the commitment.
In March 2023, the managing director and majority shareholder of a refrigerated transport company in the Morbihan guaranteed a 600,000-euro loan to his company for twelve new tractor units, up to 360,000 euros. He then declared 78,000 euros of annual income, his main residence, held jointly with his spouse and mortgaged, and his shares. The company went into receivership in February 2026, then liquidation in July. The bank demands 312,000 euros. He has received no information letter since 2024. He asks whether he must sell his house.
The answer depends on four checks, to be carried out in order, and on a preliminary question of date. This page takes them in turn: the applicable law depending on the date of signature, the handwritten statement, disproportion and its new sanction, the duty to warn, annual information and information on default, then the guarantor’s position in the company’s insolvency proceedings.
1. The preliminary question: the date of signature
Ordinance No. 2021-1192 of 15 September 2021 rewrote the law of guarantees (cautionnement) in the Civil Code (arts. 2288 et seq.) and repealed the protective provisions previously found in the Consumer Code. It applies to guarantees concluded on or after 1 January 2022; those signed earlier remain governed by the old law, including as to their effects. Two regimes therefore coexist, and a bank may hold against the same director a 2019 guarantee and a 2023 guarantee subject to different rules. One exception should be noted: the rules on informing the guarantor introduced by the reform (Civil Code, arts. 2302 to 2304) have applied to earlier guarantees since 1 January 2022.
The difference is not a detail. Under the old law, a professional creditor could not rely on a manifestly disproportionate guarantee unless the guarantor’s assets had since improved at the time it was called: the guarantor was released entirely. Under the new law, the commitment is merely reduced. The Morbihan director signed in 2023: the new law applies.
2. The handwritten statement: no longer a set formula, still a requirement
On pain of nullity, an individual guarantor must personally write a statement that he undertakes, as guarantor, to pay the creditor what the debtor owes it if the debtor defaults, up to an amount of principal and accessories expressed in words and figures; if they differ, the guarantee is valid for the amount in words (Civil Code, art. 2297). The reform abolished the word-for-word statutory formula, whose slightest variation fed abundant litigation. It did not abolish the requirement: the statement must express the nature of the commitment, the identity of the debtor guaranteed and a figure for the cap.
The provision makes a second, often overlooked point. If the guarantor waives the benefits of discussion or division, that is, if the guarantee is joint and several, he must acknowledge this in the statement; otherwise he keeps the right to rely on those benefits. A bank that had a “joint and several” guarantee signed without the statement saying so must therefore first pursue the company and, if several guarantors are involved, divide its claims between them. For a director sharing the commitment with his business partner, the effect can be considerable. The statement may be written electronically, provided the guarantor writes it himself.
3. Disproportion: assessed at signature, with a softer sanction
If a guarantee given by an individual to a professional creditor was, when concluded, manifestly disproportionate to the guarantor’s income and assets, it is reduced to the amount he could have committed to at that date (Civil Code, art. 2300). Three points structure the analysis. The assessment is made at the date of signature, not when the guarantee is called; the director’s present situation, ruined by the liquidation, is irrelevant. It covers all income and assets, net of debts, including other guarantees already given. And the disproportion must be manifest, which rules out commitments that are merely heavy.
The asset statement the bank has the guarantor fill in at signature carries great weight. The guarantor is in principle bound by his declarations, unless the bank knew of obvious anomalies or other information. A director who declared flattering assets to obtain the loan will struggle to argue later that his commitment was disproportionate. In the Morbihan case, a 360,000-euro commitment against 78,000 euros of income and a mortgaged main residence makes disproportion arguable, subject to what the 2023 statement says.
Reconstructing those assets requires method. One starts from the declarations made to the bank, then tests them against the documents of the time: the tax notice for the year of signature, the value of the main residence at that date and the capital outstanding on the mortgage, the value of the shares assessed from the latest approved accounts rather than the director’s hopes, available savings, and above all the other guarantees already given, which count against capacity, so that a director who had already guaranteed two finance leases and an overdraft for the same company can show that his real capacity was well below what his statement suggested, provided the bank knew of those commitments or they appeared in documents it held. The figure produced by this work becomes the basis of any negotiation. It had better be right.
The sanction has changed in nature. The court no longer releases the guarantor: it reduces his commitment to the amount he could reasonably have undertaken in 2023. That reduction requires a figure, and that is where the lawyer’s work lies: reconstructing net assets at the date of signature, with the value of the home and the capital outstanding, the real value of the shares, earlier commitments, and deriving a sustainable amount. The reform set no method, and the case law developing since 2024 has not yet settled the point; trial courts reason case by case.
4. The duty to warn: can an experienced director rely on it?
A professional creditor must warn an individual guarantor where the principal debtor’s commitment is unsuited to the debtor’s financial capacity; failing that, it loses its rights against the guarantor to the extent of the loss the guarantor suffered (Civil Code, art. 2299). The duty concerns not the guarantor’s situation but the company’s: was a 600,000-euro loan sustainable for a company of that turnover, with those margins and that debt?
Under the old law, the courts reserved the duty to warn for inexperienced guarantors, and a company director, familiar with business, was often treated as experienced. The new text draws no distinction: it covers “the individual guarantor”, without condition. Whether the courts will reintroduce the distinction between experienced and inexperienced guarantors has not yet been decided by the Cour de cassation, and the first trial decisions diverge. We think the wording of the text should prevail and that a director may rely on Article 2299, even if his knowledge of the company’s situation reduces, at the stage of assessing loss, what he can obtain. The sanction is a loss of rights to the extent of the loss suffered, analysed as the lost chance of not signing.
5. Annual information and information on default
Before 31 March each year and at its own expense, a professional creditor must inform every individual guarantor of the principal, interest and accessories outstanding at the previous 31 December, and remind him of the term of his commitment or, if it is open-ended, of his right to terminate it. Failing that, it loses the benefit of the guarantee for interest and penalties accrued since the previous information until the new information is given, and the debtor’s payments during that period are applied first to principal (Civil Code, art. 2302). It must also inform the guarantor of the debtor’s default at the first payment incident not remedied within a month, under the same sanction for the period between the incident and the information (art. 2303).
These sanctions do not release the guarantor from the principal. They can nevertheless amount to a large sum on a multi-year loan, and they are easy to prove: it is for the bank to show that it sent the letters, and a mere computer log of dispatch is not always enough. The Morbihan director has received nothing since 2024. If the bank cannot produce the 2025 and 2026 letters, interest and penalties for those periods fall away, and the 312,000-euro figure must be recalculated.
6. The guarantor in the company’s insolvency proceedings
The guarantor’s position also depends on the proceedings opened against the company. In safeguard and receivership, the opening judgment stops interest running and stays, until the judgment adopting the plan or ordering liquidation, any action against individual co-obligors or guarantors (Commercial Code, art. L. 622-28, applicable in receivership by cross-reference from art. L. 631-14); the bank may only take protective measures. In safeguard, individual guarantors may rely on the time allowed and write-offs granted under the plan (art. L. 626-11); in receivership they may not (art. L. 631-20). In liquidation there is no protection: the bank pursues the guarantor from the judgment.
One point must be checked in every case: did the bank lodge its claim in the company’s insolvency? An unlodged claim is unenforceable against individuals who gave a personal guarantee during and after performance of the plan (Commercial Code, art. L. 622-26). A failure to lodge, more common in small branches than one might think, can be enough to neutralise the guarantee. The rules on lodging claims are set out in the article on lodging a claim.
7. Two often-overlooked defences: the debtor’s defences and the benefit of subrogation
The reform widened the guarantor’s defences to an extent many directors are unaware of. The guarantor may now raise against the creditor all defences, personal or inherent in the debt, that belong to the debtor (Civil Code, art. 2298). If the guaranteed loan was flawed, if the bank breached its own obligations towards the company, if part of the debt was extinguished by set-off, the director can rely on it himself. The same provision sets a limit: the guarantor cannot rely on statutory or court measures the debtor benefits from as a result of its default, unless a special provision says otherwise, which refers to the insolvency rules set out above.
The second defence concerns the fate of other security. Where subrogation to the creditor’s rights can no longer operate in the guarantor’s favour through the creditor’s fault, the guarantor is discharged to the extent of the loss he suffers, and any clause to the contrary is deemed unwritten (art. 2314). In the Morbihan case, the loan financed twelve tractor units. If the bank had taken a pledge over the vehicles and failed to register it, or let it lapse by not reacting when the liquidator sold them, the director, who would have benefited from that pledge after paying, is discharged to the extent of what he could have recovered from it. The provision adds that the guarantor cannot criticise the creditor’s choice of how to enforce a security. The complaint therefore concerns losing the security, not the way it was enforced. To check this, the bank should be asked for a statement of all its security, and the administrator or liquidator for what became of the assets it covered.
8. Strategy: negotiate on quantified defences
Most guarantee calls end in a settlement. The bank knows it, and settles all the more readily when the guarantor comes with quantified defences rather than a challenge of principle. For the Morbihan director, the file can be built within a few weeks: obtain the guarantee deed and the 2023 asset statement, reconstruct his net assets at that date, calculate the amount to which a court could reduce the commitment under Article 2300, deduct the interest and penalties lost by the bank under Articles 2302 and 2303, check the proof of claim in the company’s insolvency, and assess the duty-to-warn argument. He then negotiates on a figure, not an impression. Selling the house comes, if at all, last.
The firm assists directors called on by their bank under a personal guarantee, from analysis of the deed to settlement or trial, and advises them beforehand on the extent of the commitment they are asked to sign. Its page on business law describes this work, and the contact form allows a demand letter to be outlined in a few lines.
Frequently asked questions
Does the reform of guarantees apply to a guarantee signed in 2020?
Essentially no. The ordinance of 15 September 2021 only applies to guarantees concluded on or after 1 January 2022. A 2020 guarantee remains governed by the old law, in particular the rule that a professional creditor cannot rely on a manifestly disproportionate commitment. The reform’s rules on informing the guarantor (Civil Code, arts. 2302 to 2304) have, however, applied to earlier guarantees since 1 January 2022.
Is a disproportionate guarantee void?
Not since the reform. For guarantees concluded since 1 January 2022, a commitment manifestly disproportionate to the guarantor’s income and assets when concluded is reduced to the amount he could have committed to at that date (Civil Code, art. 2300). The guarantor remains liable within that limit.
Can a company director complain that the bank did not warn him?
Article 2299 of the Civil Code requires a professional creditor to warn any individual guarantor where the principal debtor’s commitment is unsuited to its financial capacity, without distinguishing experienced from inexperienced guarantors. The Cour de cassation has not yet decided the question for directors. The sanction is a loss of the bank’s rights to the extent of the loss suffered by the guarantor.
What does a bank risk if it does not inform the guarantor every year?
It loses the benefit of the guarantee for interest and penalties accrued since the previous information until the new one, and the debtor’s payments during that period are applied first to principal (Civil Code, art. 2302). The same sanction applies if it fails to inform the guarantor of the first payment incident not remedied within a month (art. 2303).
Can the bank pursue the director during his company’s receivership?
Not during the observation period. The opening judgment stays actions against individual guarantors until the judgment adopting the plan or ordering liquidation (Commercial Code, arts. L. 622-28 and L. 631-14); the bank may only take protective measures. In receivership, unlike safeguard, the guarantor cannot then rely on the time allowed under the plan. In liquidation, proceedings may be brought immediately.
On the same subject: director liability for a shortfall of assets in liquidation; removing a director: proper cause, compensation and procedure; mandat ad hoc and conciliation, negotiating with creditors before insolvency.