Personal surety for your business: assess the risk to your own assets

1. Establish what you are signing personally

Collect the loan agreement, surety deed, general terms and all schedules. Check whether you sign once for the bv and additionally in your personal capacity. A signature on a page you regard as an administrative attachment may still create an obligation of your own. Ask the financier in writing which document governs your personal exposure and which other documents form part of it.

Have the distinction between suretyship, joint and several co-debt and another type of guarantee assessed. Legal meaning does not follow solely from the heading used. Ask which event allows a demand and which defences you can raise. A general explanation that every director signs this is not an assessment of your amount, duration and contractual position.

2. Specify the amount and covered debts

If a maximum is stated, examine what it limits. Are interest, costs or future credit facilities included or excluded? Does the surety cover one loan only or a broader financing package? Summarise the provisions and have ambiguous wording clarified before signing. A loan for a particular sum does not automatically limit every personal risk to exactly that sum.

Check what happens on an increase, refinancing or extension. If you intend to support only a defined investment, make sure that purpose and debt are clearly recorded. Keep later additions and consents to changes. When a demand already exists, the amount claimed must be traced to the covered debt, separately showing principal, payments, interest and costs.

3. Have the applicable protection assessed

Article 7:857 of the Burgerlijk Wetboek (BW) defines the protection for a private surety. It concerns a natural person not acting in a profession or business, nor for the ordinary business activities of an nv or bv of which they are a director and hold a majority of shares alone or with fellow directors. A business financing purpose therefore does not always exclude private-surety protection. Have your directorship, shareholding and the transaction assessed as at signing; a standard bank declaration does not settle that classification.

Where this protection applies and the amount of the principal obligation is not fixed when the suretyship is entered into, the suretyship is valid only insofar as a monetary maximum has been agreed. This is the conditional rule in Article 7:858, not a requirement for a new maximum for every debt already fixed. Interest and costs payable by law may fall outside that maximum under the separate rules. For evidence against a private surety, Article 7:859 requires a document signed by that person. After full or partial performance by the surety, evidence may be provided by any means. This is an evidential rule, not automatic invalidity of every oral agreement. Spousal consent requires the separate assessment below.

4. Examine consent and the business exception

Judgment ECLI:NL:HR:2003:AF7513 addresses the exception to consent for a director with the required shareholding and a transaction for ordinary business activities. An intermediate holding company can also matter, but the other conditions must still be checked. Merely saying that the money was for the business is not a complete analysis of this exception.

Give the lawyer the group chart, shareholding percentages, director details and financing purpose at the time. Also explain what information and consent the spouse actually gave. If reliance on missing consent appears possible, have the form and deadlines examined immediately. A bare denial by the surety is not necessarily the same act as a valid invocation by the person entitled to do so.

5. Do not confuse a government guarantee with your own release

RVO describes the Borgstelling MKB-kredieten, or BMKB, as a scheme under which government provides partial security to enable financing. That relationship is different from your personal surety deed. The BMKB label does not prove that you owe nothing yourself or that your personal undertaking ends. Ask the financier which securities coexist and exactly which obligation you assume.

Have the whole security structure assessed: pledges, mortgages, group guarantees and personal suretyship. Ask how enforcement or payment by another party affects the remaining amount. Do not deduct an expected government contribution from the claim yourself. Realisation of the various securities must match the agreement and the current outstanding debt.

6. Respond to a demand without unnecessary admission

Under Article 7:855 BW, the statutory starting point for suretyship is that the principal debtor must first have failed to perform before the surety is obliged to perform. If the creditor gives the principal debtor a notice of default under Article 6:82 BW, the surety must be informed simultaneously. This is not the same as a general duty first to enforce against all business assets. Request the breakdown, demands and documents supporting the claim. Also have contractual arrangements and protective rules assessed. Take any formal court document to your adviser immediately; a payment arrangement or admission may affect your defence.

If you no longer wish to remain a surety, examine the agreed duration, notice options and written release. Resigning as director or selling shares does not automatically end an earlier surety. During a sale or departure, ask expressly which confirmation the financier must provide. A buyer’s promise to take everything over does not automatically bind the bank.

7. Fictional example: leaving the bv without bank confirmation

Suppose a business owner personally signed a surety deed for the bv’s working-capital loan. When the shares are sold, the buyer agrees to bear all debts. A year later arrears arise and the bank pursues the seller. The seller thought the share transfer automatically ended the surety.

A useful file includes the original surety, loan amendments, sale arrangements and any correspondence with the bank about release. The external obligation and internal indemnity can then be assessed separately. This fictional example predicts neither a payment obligation nor a successful defence; it shows why departure and release are separate steps.

8. Checklist for surety advice

Before signing, ask about the maximum realistic exposure; when facing a claim, first ask about its basis and urgency. Bring documents you thought were purely administrative too. A complete set avoids an important personal provision emerging only after the first letter.

• Loan, surety deed, terms and all subsequent changes.
• Maximum, covered debts and specific interest and cost provisions.
• Directorship, shareholding structure and financing purpose at signing.
• Spouse’s position, consent and any connection with foreign law.
• Demand, payment overview, departure arrangements and written release.