Your Romanian subsidiary has agreed the commercial terms, but the counterparty will sign only if its foreign parent stands behind the deal.

The guarantee may look like an attachment to the main contract; for the group, it can be the document that determines whether a local contract problem reaches the parent company’s balance sheet.

This article is for the parent, its in-house legal team and the Romanian business negotiating that request.

It focuses on the decision to give a guarantee and the legal review needed before the parent signs, rather than providing a guarantee form to reuse.

Does the parent have to guarantee the subsidiary’s contract?

Romanian companies have separate legal personality under Law no. 31/1990 on companies; Article 193 of the Civil Code also describes a legal person’s liability for its own obligations.

That separation matters: the parent does not generally become a party to every supply, services or lease obligation merely because it controls the subsidiary.

Under Article 193(2) of the Civil Code, separate legal personality cannot be invoked against a person acting in good faith to conceal fraud, an abuse of rights or a breach of public order.

That provision does not make a parent automatically liable for every subsidiary debt.

A creditor may nevertheless insist on parent support if the Romanian company is new, has limited assets, has a short payment history or is taking on obligations larger than its standalone financial capacity.

The real negotiation is then about what support the creditor needs and what liability the group can approve.

A parent guarantee is only one possibility; a bank guarantee, deposit, escrow, staged performance or limited payment security may address a different risk profile.

Those alternatives have different pricing and legal effects, so they should be assessed with the underlying contract rather than exchanged by name alone.

Which guarantee is the counterparty actually asking for?

Select a document type to see the issue a lawyer would examine first.

The Romanian Civil Code, Articles 2279–2282, distinguishes personal guarantees; Articles 2280 and 2282 define fideiusiune, or suretyship, and its form.

Under Article 2280, the surety undertakes to perform the debtor’s obligation if the debtor does not; Article 2282 requires the suretyship to be expressly assumed in writing, under penalty of absolute nullity.

The treatment of scope, accessories and recourse depends on the particular undertaking and the applicable legal rules.

Where its terms fit the statutory model, Article 2321 treats a letter of guarantee as an autonomous undertaking to pay a sum under its terms; the issuer cannot raise defences derived from the pre-existing underlying relationship against the beneficiary, but cannot be compelled to pay in a case of abuse or manifest fraud.

Article 2322 treats a letter of comfort as an irrevocable, autonomous undertaking to do or refrain from doing something to support the debtor, rather than a harmless expression of goodwill.

If the debtor fails to perform, the comfort-letter issuer may owe damages only where the creditor proves that the issuer failed to perform its own undertaking and establishes the resulting loss under the applicable rules.

A commercial document headed “parent company guarantee” can combine terms that point in different directions.

Legal review should establish what the instrument does, who may make a demand, which defences are available and which law governs those questions, without assuming that a label imported from another jurisdiction has a fixed Romanian effect.

What could the parent be paying for?

The initial contract value is only one part of the picture.

A guarantee may be drafted to cover later purchase orders, extensions, rent increases, interest, penalties, damages, enforcement costs or obligations under future amendments.

For a framework relationship, the exposure can change as new orders are accepted; a Romanian commercial contract review should compare the framework with the orders it governs.

Where Romanian suretyship rules govern, Article 2289 prevents its extension beyond the agreed limits; Article 2290 covers accessories of the principal obligation in the absence of contrary agreement, and Article 2291 permits suretyship for only part of that obligation.

Article 2288(3) permits suretyship for future or conditional debt, so identify the future contracts and obligations the parent intends to cover rather than relying on a generic group-wide label.

A negotiated cap needs to say whether it includes interest, penalties, taxes, damages and costs or applies only to the core payment.

It should also be clear whether amounts paid reduce the available cap, whether the cap resets each year and whether multiple contracts share one limit.

The client does not need to resolve those drafting questions alone; they are precisely what a focused review of the proposed guarantee and main contract should test.

A guarantee demanded for a commercial lease deserves the same scope check as one supporting supply or services.

Our commercial lease guide discusses the distinction between parent, bank and other security when negotiating premises in Romania.

Can the creditor call on the parent before exhausting the subsidiary?

The answer depends on the instrument, the applicable law and any express waiver.

Under Article 2294, a conventional or legal surety may require the creditor first to pursue the principal debtor’s assets, unless that benefit has been expressly waived; invoking it also has procedural conditions under Article 2295.

Article 2300 removes the benefits of prior pursuit and division when a surety undertakes liability solidarily with the principal debtor.

Articles 2297–2298 address the separate benefit of division where several sureties guarantee the same debt.

Waivers and solidarity wording therefore change enforcement risk and should be reviewed rather than accepted as routine boilerplate.

For a letter of guarantee within Article 2321, the demand must meet the instrument’s terms; the issuer cannot oppose defences derived from the pre-existing underlying relationship, subject to the statutory exception for abuse or manifest fraud.

It would be unsafe to tell a parent that the creditor must always sue the subsidiary first, just as it would be unsafe to assume every parent guarantee is payable on an unsupported email.

The proposed wording, the main contract and the transaction documents need to be read together.

Who can approve and sign on behalf of the parent?

If the guarantor is a foreign company, its own law, constitutional documents, governance rules, financing covenants and internal approval thresholds may determine who can bind it.

A signature by a group manager does not establish the existence of board approval or delegated authority.

Romanian counsel can coordinate the Romanian transaction requirements with advice on the parent’s home jurisdiction where needed.

On the Romanian side, Articles 70–71 of Law no. 31/1990 may be relevant to the subsidiary’s signing chain, together with its constitutional documents, registered representation and internal approvals; they do not establish a foreign parent’s authority.

A parent’s guarantee should be mapped to the right subsidiary, contract and beneficiary; inconsistent company names or a change of contracting entity can create avoidable enforcement disputes.

For an Article 2321 letter of guarantee, paragraph (5) also provides that it does not transfer with the underlying rights or obligations unless otherwise agreed.

Where a Romanian company is itself asked to guarantee another group entity, counsel should examine the benefit to that company, the directors’ duties, the approvals and any financing restrictions; group benefit alone may not be sufficient, depending on the circumstances and applicable law.

Our article on shareholder loans to Romanian companies concerns funding the subsidiary and is a separate transaction from securing its debt to a commercial counterparty.

How should a cross-border guarantee be reviewed?

Check the law governing the guarantee separately from the law governing the main contract, together with the chosen court or dispute forum and the practical place of enforcement.

The EU Rome I Regulation supplies the contractual choice-of-law framework within its scope, but the final analysis also depends on the instrument and any applicable mandatory rules.

A Romanian-law supply agreement does not, by itself, answer every question about a guarantee signed by a foreign parent.

Equally, a foreign governing-law clause should not be read as a substitute for checking Romanian contracting, performance and enforcement issues.

Translation, delivery of demands, currency conversion and service of proceedings may be commercially important even where the governing-law clause appears short and familiar.

These are not reasons to reject a guarantee; they are reasons to price and document it with the same care as the main transaction.

When does the guarantee end?

There may be more than one relevant date: the deadline for new orders, the end of the main contract, the final payment date, the last date for a demand and the date a release is issued.

A suretyship may still support obligations already incurred after the business relationship ends, depending on its wording and the applicable rules.

For an Article 2321 letter of guarantee, paragraph (7) provides that, unless its text says otherwise, it expires by operation of law at the stipulated time, whether or not the original is returned.

Renewal clauses and variations to the main agreement should therefore be compared with the guarantee’s extension language before the contract is signed and whenever it is amended.

In particular, a parent should ask whether the beneficiary can expand the subsidiary’s commercial obligations without another parent approval.

If the parent later sells the subsidiary, exits the market or refinances the group, an unreleased guarantee may remain a transaction issue.

Our Romanian acquisition term sheet guide explains why existing group guarantees need to be identified separately during a transaction.

Where expiry or discharge operates under the instrument or the law, a written confirmation can still help the group evidence the position; it is not a universal legal condition for expiry.

What can a lawyer do before the parent signs?

A targeted mandate can be limited to the guarantee, its main contract and the approval evidence, or extended to negotiation of the wider commercial arrangement.

For the parent, the review should identify the proposed instrument’s legal character, the exposure the group is accepting and the points worth negotiating with the creditor.

For the subsidiary, the same review should check whether the security request changes commercial pricing, default remedies or the ability to move to another supplier or premises.

For the creditor, the question is whether the instrument provides meaningful security without drafting uncertainty that will obstruct a legitimate claim.

We can review the draft, identify the material issues, propose revisions and coordinate signature documents with the relevant foreign advisers when the parent is established abroad.

No particular wording, counterparty concession or enforcement outcome can be guaranteed.

Initial enquiries should describe the issue and deadline; sensitive documents can be shared after a suitable channel and the scope of engagement are agreed.

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