Liability of The Guarantor Partner after Their Withdrawal

A guarantor is someone who agrees to pay your rent if you don’t pay it, for example a parent or close relative. If you don’t pay your landlord what you owe them, they can ask your guarantor to pay instead. If your guarantor doesn’t pay, your landlord can take them to court.

In commercial relations, it is common for creditors to demand that a partner of the company be the guarantor of the company’s obligations. A problem may arise when the guarantor partner withdraws from the company. Is he still liable for the company’s debt?

Recently, in the judgment of Civil Appeal No. 1131703-72.2016.8.26.0100, the 26th Chamber of Private Law of the Court of Appeals of the State of São Paulo determined the maintenance of the liability of the partner who guaranteed the company’s debt, even after his withdrawal, due to the lack of extinction of the guarantee or consent of the creditor to the substitution of the guarantor, subject to any right of recourse that the latter may have against the debtor and its current partners.

In this case, the guarantor was surety in a lease agreement to which the company was party and sold his corporate participation before there was any default under the contract. On the sale, the buyers assumed responsibility for all the company’s debts.

However, it is possible that the withdrawing partner may be released from his liability as guarantor. Ideally, the contract with the third party containing the guarantee should establish conditions for his replacement in the event of withdrawal of the guarantor partner.

In the absence of such a provision, the recommended course of action is for the guarantor, together with the company, to approach the creditor prior to any default, informing the latter of his withdrawal from the company and offering a substitution of the guarantee.

If the creditor refuses, it is possible to obtain an exoneration of liability by means of a lawsuit, demonstrating the guarantor’s good faith and that the reason for granting the guarantee no longer exists.

STÜSSI-NEVES ADVOGADOS main area of practice is the so-called corporate law, meaning that we are capable of rendering all services that a company needs in order to get established in Brazil, either by incorporating a subsidiary or by acquiring an existing Brazilian company or even through a joint-venture, as well as of assisting the incorporated companies in their daily businesses and routines, in tax, contractual, corporate, labour, litigation areas, compliance and data protection among others.

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