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EXPLANATORY NOTES FOR THE COMBINED SURETYSHIP, PLEDGE OF SHARES AND CESSION OF CLAIMS ON LOAN ACCOUNT DOCUMENT
A suretyship is a security undertaking where one entity (“the Surety”) agrees to be liable for the debts of another entity (“the Borrower”) that is currently owing or which may be owing in future by the Borrower to an entity it has borrowed money from (“the Lender”).
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The suretyship creates the legal link in terms of which the Surety becomes liable to the Lender for the debts of the Borrower. It is advised that the suretyship be backed by substantive security; in this regard the Lender may require that the Surety provide a pledge of shares in the Borrower (if it is a company), or a cession of the Surety’s claims on loan account against the Borrower as security under the suretyship; the latter two forms of security are the ones used typically when the Surety is a shareholder; there is nothing however that prevents the suretyship from being secured by other forms of security. (As examples have regard to the various security cessions on this site; such may be purchased, but must be tailored to refer to the suretyship concluded between the Surety and the Lender as opposed to the agreements currently reflected therein.)
This document encapsulates a suretyship, pledge of shares and a cession of claims on loan account in one easy to use document; to reiterate, not only does this document create the legal link in terms of which the Surety becomes indebted to the Lender, it also secures the obligations of the Surety by providing two further forms of security, i.e. the pledge of shares and the cession of claims on loan account.
Please read carefully through the document and fill in all missing details; in preparing a signature document, please have regard to all the notes we have placed hereon to assist you with the conclusion of a professional, legally binding suretyship.