Surety and spouse, a dispute… with the bank

If, as a director and major shareholder of a Dutch BV, you are held personally liable by the bank on the basis of a surety (in Dutch: borgtocht) , you should immediately check first if the surety is legally valid. This is not always the case. Especially if the spouse did not give formal consent, there are sometimes possibilities to get rid of the personal surety. There may be a solution based on Section 1:88 of the Dutch Civil Code. A specialized lawyer can help with this.

Introduction

Unfortunately, it happens often: the UBO’s business is struggling and the bank demands repayment of the loans. And if the debts cannot be repaid (in full), the bank holds the entrepreneur personally liable on the basis of a personal guarantee / surety. Suddenly, there is a lot at stake privately. If there is even the slightest possibility, the spouse may try to have the guarantee annulled under Dutch law because he or she did not co-sign it. The combination of guarantee, spouse, and bank continues to occupy the minds of entrepreneurs, and the courts.

Zero sum game

There is a lot of litigation surrounding the issue of spouses, guarantees, and banks: for the entrepreneur and spouse (or registered partner), it is a zero-sum game: either the guarantee can be enforced or it cannot. The amounts involved are often substantial. This has a severe impact on the private situation, perhaps also the marriage itself.

Skin in the game

In practice, it often happens that an entrepreneur or investor is urgently requested by the bank to co-sign personally because ‘skin in the game’ is important. And no loan is also an option, at least for the bank. Unfortunately, this principle of skin in the game does not really apply to bankers themselves, who sometimes like to attract risky loans or products for their bank and use their customers’ savings to back them up. But that seems like a legal blog for the next crisis.

What is a surety?

Under Dutch law, a surety bond is a unilateral guarantee. It is often part of a package of collateral for business financing. If X fails to pay, the beneficiary can call on the guarantor. In practice, X is often a private limited company owned by the director/major shareholder who is acting as guarantor, and the beneficiary is often the bank. But it is not just about banks. Guarantees, commonly referred to as personal guarantees, are also provided for the benefit of children, other family members, or (business) friends or their private limited companies.

An interesting variant is the asset maintenance statement, which is regularly requested by the buyer from the seller in the event of a company takeover. The UBO of the selling holding company is then asked to guarantee that its holding company will maintain a minimum amount of liquid assets for any claims arising from an indemnity or guarantee.

Consent for personal guarantee

Article 1:88 of the Dutch Civil Code (BW) sets out the rules whereby the consent of the spouse is required in order to legally provide a private guarantee to a third party.

This provision is intended to protect spouses who are not properly informed of such transactions but whose family could be severely affected. Please note that for the purposes of Article 1:88, a registered partner is treated in the same way as a spouse for Dutch legal purposes.
If consent for the guarantee has not been given, the spouse can annul the guarantee, which will then be void. The director / major shareholder will not then have to pay himself or herself.

Ordinary course of business

Article 1:88, paragraph 5 of the Dutch Civil Code provides a the major exception to the obligation for the spouse of the director and major shareholder to sign for approval. This is if the loan to which the guarantee relates is in the ordinary course of business. The question what such normal business practice is, is a major source of legal discussion in the Netherlands. In lower court rulings, it is very difficult to guidance in terms of who should be better protected: the family or the bank. The Supreme Court is also moving from left to right, but clarity is slowly emerging.

From the left…

At the end of 2015, for example, the Dutch Supreme Court ruled that an emergency bridge loan to save a company is not for the normal business operations of that company. The fact that the bridging loan was necessary for the company to be able to continue its normal business operations at all was irrelevant. ING Bank lost because permission was required but not given.

To the right…

In mid-2018, the Supreme Court took the opposite view: an accountant who uses borrowed money to buy into an accounting firm with his private limited company does not need his spouse’s signature. The purchase is necessary for the normal conduct of business. The accountant’s BV was set up specifically for this purpose, and the bank loan actually benefited his own private limited company. Rabobank wins: the guarantee remains in place. Whether this also applies to the marriage is unclear.

Back to the left…

In 2020, the Supreme Court of the Netherlands clarified that the security must be provided by the guarantor for the purpose of a legal act (i.e. getting a loan) that takes place in the normal course of business. This case concerned invoices for the hiring of personnel that could not be paid on time. The lender demanded a private guarantee to prevent a bankruptcy petition. A surety was issued for this purpose. Hiring temporary staff was part of the normal course of business, but the surety did not necessarily cover this since the primary goal of this personal guarantee was to avoid insolvency.

The Supreme Court was unable to rule on whether preventing bankruptcy is part of the normal course of business, as this is a matter for the appeals court, but in view of the 2015 ruling, I assume that it is not.

Recent example of factoring

This provides a reasonably clear picture of when or when not the consent of the spouse is required for a private guarantee. A good example is provided by the Court of Appeal in Den Bosch, the Netherlands on July 1, 2025. A company that manufactures concrete floors and prefabricated parts enters into a factoring agreement to finance growth. Part of the security package is a personal guarantee from the managing director who is also the majority shareholder. However, the spouse does not co-sign the surety for consent. The guarantee is ultimately invoked and the spouse tries to annul the guarantee. This is in vain, because the security was entered into for the purpose of normal business operations. The fact that the factoring related to a larger project than usual is irrelevant.

Be careful

Both the private guarantor and the beneficiary must be fully aware of whether or not the spouse’s consent is required. It is by no means always necessary. And sometimes it is also not desirable or possible. But the stakes are high: a guarantee is legally binding or not. Good advice and a good contract make all the difference. Otherwise, a well-conducted legal procedure may make the difference.