Suretyship: What Business Leaders Need to Know About Proportionality (Recent French Supreme Court Decisions)

As a business leader, you frequently face the need to secure financing to grow your business. These transactions very often involve guarantees, and the personal suretyship of the company director is a common practice. However, while suretyship is a valuable tool, it also represents a commitment with serious consequences for your personal assets. The law, and more specifically case law, has developed rules to protect the surety, notably through the requirement of proportionality of the commitment.

Understanding these rules is essential, whether you are standing surety for a loan taken out by your company or requesting a suretyship from a third party (for example, in connection with a lease or a supplier guarantee). The ordinance of 15 September 2021 profoundly reformed the law of security interests, including suretyship. While the new rules have largely applied since 1 January 2022, the former provisions of the Consumer Code continue to govern suretyships entered into before that date, and the decisions of the Cour de cassation handed down between 2022 and 2025 provide very useful clarifications. It is on these recent rulings, which often concern the former law but whose logic remains relevant, that we shall focus.

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Why the Proportionality Requirement?

The underlying concept, born from a 1989 statute (known as the loi Neiertz), was to protect individuals acting as sureties for consumer or mortgage loans. This protection was subsequently extended, by a 2003 statute, to any suretyship entered into by a natural person in favor of a professional creditor. The objective is simple: to prevent a natural person from committing to guarantee a debt whose amount is manifestly beyond their financial means at the time they sign the commitment.

Former Law vs New Law: What Has Changed (and What Has Not Really Changed in Practice)

The 2021 reform replaced the former provisions (L. 314-18, L. 341-4, L. 313-10, L. 332-1 of the Consumer Code) with article 2300 of the Civil Code. The two major changes introduced by article 2300 are:

The point in time for assessment: Henceforth, disproportionality is assessed solely at the date the commitment is entered into. The former law provided an “escape route” for the creditor: if, at the time the surety was called upon to pay, the surety’s assets enabled them to meet the obligation, the creditor could enforce the suretyship even if it was initially disproportionate. This possibility, known as the “return to better fortune,” has been abolished under the new law.
The sanction: Under the former law, the sanction for disproportionality was the creditor’s inability to enforce the suretyship. Under the new law, the sanction is a judicial reduction of the suretyship to the amount for which the surety could have committed at the date of signing.

Even though the new law is in force, disputes concerning prior suretyships (signed before 1 January 2022) continue to give rise to decisions. This is why the clarifications provided by recent case law on the former law are critical.

How Proportionality Was (and Often Still Is) Assessed in Court

The assessment of proportionality is made with regard to the surety’s assets and income. It is for the surety who considers their commitment to be disproportionate to provide proof thereof. The judges then analyze whether, at the time of signing, it was manifestly impossible for the surety to meet their commitment with their own means.

Recent decisions of the Cour de cassation shed particular light on three points:

1. The Information Sheet: A Crucial Document

Although it is not a strict legal obligation, the information sheet completed by the surety for the creditor is of major importance.

For the creditor: The creditor is entitled to rely on the information provided, unless there is an apparent anomaly. The creditor is not required to verify the accuracy of the amounts declared (Cass. com., 21 sept. 2022, n 21-12.218).
For the surety: If the surety completed a sheet that appeared complete and free of anomalies, they cannot subsequently claim that their actual situation was less favorable and that the commitment was disproportionate (Cass. com., 18 dec. 2024, n 23-14.402).
Caution: If the creditor did not request a sheet, the surety is not required to spontaneously disclose their prior commitments. In that case, the court must take into account all of the surety’s assets and income whose existence can be proven (Cass. com., 4 avr. 2024, n 22-21.880).
Limitations for the creditor: The Cour de cassation is strict in certain cases. A creditor cannot disregard information that it cannot fail to be aware of, even if it does not appear on the sheet. For example, if a banker is part of a banking pool, it must take into account the other suretyships given by the same person to the other banks in the pool when assessing the surety’s indebtedness (Cass. com., 22 janv. 2025, n 23-22.093).

The Date of the Sheet Is Determinative:

A sheet signed after the suretyship cannot be taken into account to assess the initial disproportionality (Cass. com., 13 mars 2024, n 22-19.900).
A sheet that is too old may allow the surety to provide supplementary evidence (Cass. com., 30 aout 2023, n 21-20.222).
Even the surety’s disloyal conduct (for example, failing to disclose new suretyships on an old sheet) does not suffice to excuse the bank’s breach of its duty to inform if the sheet is too old or absent. The bank may then lose its right to enforce the disproportionate suretyship (Cass. com., 30 aout 2023, n 22-13.270).

What If the Sheet Is Incomplete?

A 2023 decision (Cass. 1re civ., 15 mars 2023, n 21-20.017) clarified that if the surety omits to state the value of an asset (such as a property) that they declare owning on the sheet, this omission is not necessarily an “apparent anomaly” justifying its disregard. On the contrary, the court must take this property into account, even if unvalued, when assessing proportionality. Failing to state the value of an asset does not enable one to escape the assessment of disproportionality.

2. The Court’s Obligations in the Assessment

Several recent decisions reiterate and clarify how the court must analyze the situation:

The court must not take into account assets that the surety had not disclosed at the time of signing the suretyship when assessing proportionality. The assessment is based on the “appearance” of financial standing created by the surety (Cass. com., 18 dec. 2024, n 23-14.402).
Disproportionality is assessed with regard to the surety’s ability to meet the total amount of their commitment, not merely the installments of the guaranteed debt (Cass. 1re civ., 22 mars 2023, n 22-11.119).
The possibility for the surety to obtain another loan to meet their commitment may be taken into account (Cass. com., 6 juill. 2022, n 20-16.998).
For married sureties:

Under the community property regime, disproportionality is assessed with regard to all separate and community assets and income (Cass. com., 6 juin 2018, n 16-26.182). Even if only one spouse stands surety, community assets (including both spouses’ salaries) are taken into account (Cass. com., 30 nov. 2022, n 21-13.655).

Under the separate property regime, the court considers the surety’s personal income and assets, including their share in jointly owned assets. The absence of the spouse’s consent regarding a jointly owned asset is not taken into account for the proportionality assessment (Cass. 1re civ., 19 janv. 2022, n 20-20.467).

The court must imperatively take into account the surety’s prior commitments to other banks. Omitting these elements constitutes an error (Cass. com., 30 nov. 2022, n 21-11.671).

3. The Specific Case of Company Shares

For many business leaders, the value of their company shares is a major component of their personal assets. This value must be taken into account when assessing proportionality.

The value used is that of the shares at the date of the suretyship commitment (Cass. com., 11 dec. 2024, n 23-15.744).
The actual value of the shares must be considered, not merely their nominal value (Cass. com., 12 fevr. 2025, n 23-12.599).
Crucial point: To determine the actual value of the shares held by the surety in the debtor company, the courts must take into account all of the company’s assets, including the business as a going concern, as well as its liabilities. Failing to do so constitutes a violation of the law (Cass. com., 12 fevr. 2025, n 23-12.599).
An important limitation: Any increase in value of the surety’s shares that would result directly from the transaction that the suretyship guarantees must not be taken into account. In other words, you cannot use the potential enrichment generated by the guaranteed loan to argue that the suretyship linked to that loan was proportionate at the outset (Cass. com., 10 juill. 2024, n 22-21.663).

The “Return to Better Fortune”: A Concept Applicable to the Former Law Only

As mentioned above, under the former law, even if the suretyship was initially disproportionate, the creditor could enforce it if, at the time the surety was called upon to pay, the surety’s financial situation enabled them to meet their commitment.

This situation had to be demonstrated by the creditor.
The precise point in time for assessing this “return to better fortune” was the date on which the surety was served with the court summons (Cass. com., 9 juill. 2019, n 17-31.346).
A recent decision clarified that the creditor’s right to demonstrate the return to better fortune prevented the surety from bringing proceedings on their own initiative before being called upon to pay, to seek a declaration that the creditor had forfeited the benefit of the disproportionate suretyship (Cass. com., 18 dec. 2024, n 22-13.721).

This mechanism no longer exists for suretyships signed since 1 January 2022, making the initial assessment all the more decisive.

Procedural Points to Bear in Mind

A few procedural aspects deserve your attention:

If you stood surety and agreed with the creditor to settle the debt through small installments, this does not prevent you from subsequently relying on the disproportionate nature of your initial commitment. Proposing an amicable settlement does not constitute a waiver (Cass. 1re civ., 7 dec. 2022, n 18-15.985).
If you wish to bring proceedings yourself to have the disproportionality of your suretyship declared (a less common scenario), you have a five-year limitation period. This period runs from the date on which you are formally demanded to pay, as it is at that point that you can apprehend the potential extent of the disproportionality (Cass. 1re civ., 5 janv. 2022, n 20-17.325).
However, and this is an essential point in practice: if you are sued by the creditor and you raise the disproportionality as a defense, this defense is not subject to any limitation period (Cass. com., 8 avr. 2021, n 19-12.741). This is the most common scenario.
Finally, note that a surety cannot waive in advance the right to invoke the disproportionate nature of their commitment (CA Reims, 20 fevr. 2024, n 23/01272).

Conclusion

The legal framework governing the proportionality of suretyships, whether under the former or the new law, aims to prevent ruinous commitments by natural persons. Recent court decisions highlight the crucial importance of the information provided to the creditor at the time of signing (particularly via the information sheet) and reiterate the precise criteria that courts must apply to assess your financial situation, taking into account all of your assets and income, including the particularities related to your matrimonial regime or the holding of company shares.

For you, business leaders, this means:

Be meticulous when completing an information sheet, but also know the rights and obligations of each party.
Never underestimate a suretyship commitment: precisely assess your actual financial capacity to meet it on the date of signing.
If you are called upon under a guarantee, carefully examine whether your commitment was, from the outset, manifestly disproportionate to your means at the time. This is a powerful defense argument and is often not subject to any limitation period.

The law evolves, and case law continues to refine it. Staying informed is your best guarantee.