On 17 February 2023, the Italian Supreme Court ruling No. 5017/2023 on the release of guarantors for future obligations under article 1956 of the Italian Civil Code was published. The ruling (a) confirms the general principle that a bank, in order to maintain the benefit of a personal guarantee granted in its favour, shall safeguard the unknowing guarantor in the event of a significant impairment of the debtor's economic condition (by not granting the debtor further financing, terminating - if possible - the bank account credit facility made available to the debtor to limit further drawdowns, or informing the guarantor of the relevant impairment to obtain the relevant authorisation under Article 1956 of the Italian Civil Code) and (b) states, inter alia, that the bank shall enact these safeguards also if the significant impairment is determined by the assumption by the guaranteed debtor of third-party debts vis-à-vis the bank (in the specific case, the guaranteed debtor assumed new debt vis-à-vis the bank because a third party – who was also a debtor of the bank – contributed to the debtor a business concern he previously owned).
Originally published by March, 2023
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