Cross-guarantees

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1.

Guarantees given by the participants in a notional pooling scheme to the bank providing the notional pooling service that they will honour any outstanding dues in the event of the failure of one of the members to fulfil its duties.


Reluctance to take up notional pooling
"Some treasurers are reluctant to take up notional pooling, as they do not want the related indemnity between entities, whereby the cross-guarantee might mean one entity became liable for another’s debt if they were to go bankrupt, for instance."
The Group Treasurer, An ACT guide to the first 100 days, page 25.


2.

Similar guarantees given by companies within a group in relation to the financial obligations of other group companies. For example in relation to servicing and repaying loans.


Cross-guarantees may have tax implications and may be difficult to enforce on a cross-border basis.


See also