Roche & Cie

SCI : Validity of a surety bond

16 Dec 2016

A bond granted by a real estate company (SCI) to guarantee the debts of its manager and approved unanimously by the partners is valid when it enters the corporate purpose.

A real estate corporation (SCI) may act as guarantor of a bank loan subscribed by its manager or by a partner in its personal capacity.

In order for this transaction to be valid, it would require, on the one hand, the unanimity of the partners and, on the other hand, the guarantee given by the company would have to be in accordance with its social interest.

These conditions have just been recalled by the judges.

In this case, the managing partner of an SCI, acting in his personal capacity, borrowed from a bank a certain amount of money in order to release his contribution in cash. Thanks to this contribution, the company had bought two properties for the same amount as the loan. The acquisition of these two buildings as well as the subscription by the SCI of a guarantee securing the loan of its manager had been approved unanimously by the partners. Subsequently, since the maturities of the loan had not been met by the manager, the bank had sued SCI in fulfillment of its guarantee.

However, in order to refuse execution, the latter had argued that the bond was not valid because it was contrary to the social interest and that its application could jeopardize the very existence of the company.

The Court of Cassation did not accept the SCI’s arguments and considered, on the contrary, that the bond was in the interest of the company. Indeed, it noted that by pledging the loan subscribed by its manager, the SCI had been able to acquire a real estate patrimony and collect rent thanks to the letting of the buildings. Consequently, the SCI had to pay the bank the sums claimed by it in respect of its guarantee.

Commercial Cassation, november 2, 2016, n° 16-10363
Source : Les Echos

Cabinet Roche & CieChartered Accountant in France (Lyon).
Specialist in Real Estate and Non-Residents’ taxation.