Loan Guarantor Agreement for South Africa

Loan Guarantor Agreement Template for South Africa

A comprehensive legal document governed by South African law that establishes a guarantee relationship whereby one party (the Guarantor) agrees to be liable for the debt obligations of another party (the Borrower) to a third party (the Lender). The agreement is subject to the National Credit Act and other relevant South African legislation, incorporating specific provisions for enforcement, liability limits, and remedies available under South African law. It includes detailed terms regarding the scope of the guarantee, enforcement mechanisms, and the rights and obligations of all parties involved.

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What is a Loan Guarantor Agreement?

The Loan Guarantor Agreement is a crucial financial instrument in South African commercial practice, typically used when additional security is required for a loan facility. This document is essential when a lender requires extra assurance beyond the borrower's covenant, particularly in corporate financing, property transactions, or business expansion scenarios. The agreement must comply with South African legislation, particularly the National Credit Act 34 of 2005, and includes specific provisions regarding the guarantee's scope, enforcement procedures, and parties' rights. It's commonly used in both corporate and personal contexts, though the requirements and protections may differ depending on whether the guarantor is a corporate entity or an individual. The document typically includes details of the underlying loan facility, the extent of the guarantee, enforcement mechanisms, and any specific conditions or limitations on the guarantee.

What sections should be included in a Loan Guarantor Agreement?

1. Parties: Identifies the Guarantor, Lender, and Borrower with their full legal details and capacity to contract

2. Background: Describes the underlying loan agreement and the context for the guarantee

3. Definitions and Interpretation: Defines key terms and establishes interpretation rules for the agreement

4. Guarantee: Sets out the primary guarantee obligations and extent of the guarantor's liability

5. Nature and Duration of Guarantee: Specifies whether continuing guarantee and duration of obligations

6. Guarantor's Warranties and Representations: Guarantor's confirmations regarding capacity, authority, and financial status

7. Payment Obligations: Details of how and when guarantee payments must be made

8. Lender's Rights and Protections: Preserves lender's rights and remedies under law

9. Demand and Enforcement: Process for making demands under the guarantee and enforcement procedures

10. Costs and Indemnity: Guarantor's obligations regarding costs and indemnification of the lender

11. Notices: Requirements for valid notices under the agreement

12. General Provisions: Standard boilerplate clauses including governing law, jurisdiction, etc.

What sections are optional to include in a Loan Guarantor Agreement?

1. Security: Include when guarantee is secured by specific assets

2. Multiple Guarantors: Include when there is more than one guarantor to address joint and several liability

3. Corporate Guarantor Provisions: Include specific provisions when guarantor is a company

4. Limit of Liability: Include when guarantee is capped at a specific amount

5. Priority and Subordination: Include when there are multiple creditors or ranking of security

6. Financial Covenants: Include when guarantor must maintain specific financial metrics

7. Assignment and Transfer: Include detailed provisions when transfer rights are important to the lender

What schedules should be included in a Loan Guarantor Agreement?

1. Schedule 1 - Underlying Loan Agreement Details: Key details of the loan being guaranteed including amount, term, and interest rate

2. Schedule 2 - Guarantee Limit Details: If applicable, specific details of any cap on the guarantee amount

3. Schedule 3 - Security Details: If applicable, details of any security provided for the guarantee

4. Schedule 4 - Form of Demand: Prescribed form for making demands under the guarantee

5. Schedule 5 - Compliance Certificate: Form for periodic confirmation of compliance with financial covenants if applicable

6. Appendix A - Resolution of Authority: Corporate resolution or other authority documentation for the guarantor

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

South Africa

Publisher

Genie AI

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant Industries

Banking

Financial Services

Real Estate

Corporate Finance

Construction

Manufacturing

Mining

Retail

Agriculture

Infrastructure Development

Private Equity

Small and Medium Enterprises

Relevant Teams

Legal

Finance

Credit

Risk Management

Compliance

Treasury

Corporate Finance

Commercial

Company Secretariat

Banking

Relevant Roles

Chief Financial Officer

Financial Director

Legal Counsel

Corporate Lawyer

Credit Manager

Risk Manager

Commercial Director

Treasury Manager

Compliance Officer

Company Secretary

Banking Relationship Manager

Credit Analyst

Legal Risk Officer

Finance Manager

Corporate Finance Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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