Insider guarantees play a crucial role in corporate finance. In small and medium companies, shareholders frequently guarantee business debts towards a professional creditor, often the bank. In corporate groups, group companies often guarantee each other’s debts towards a lender. This PhD thesis gives an in-depth overview of the economics involved and reviews relevant legal regulation in the US, Germany and the Netherlands.
The guarantee relationship can lead to efficiency gains, but is also prone to opportunistic use towards both insiders and outsiders of the relationship. German, Dutch and US law have some, but widely differing mechanisms to deal with opportunistic use. Legal practitioners will appreciate the clear guidance on the dynamics and the overview of the regulation of and (liability) risks for parties involved.