May a partner unilaterally withdraw from the “aval” (guarantee) granted on a blank promissory note after leaving the company?

The Supreme Court of Justice (SCJ) has issued a Standardization Ruling (SR) no. 1/2025)  published in Diário da República, 1^st Series, on 08.01.2025, to the effect that: "(1) The guarantee given on a blank promissory note, provided that it is given without a term or for a renewable term, after the initial term has elapsed, susceptible of a unilateral communication of termination by the person bound by the guarantee that no longer retains the position of partner or managing partner of the guaranteed company, until the instrument is completed. (2) The termination will only take effect for the future, i.e. the loss of binding effect will only be effective towards amounts that are requested after the termination has taken effect."

This is a decision with strong economic and social relevance by addressing a common and widely accepted practice in legal commerce. The delivery and subscription of a blank promissory note by a company guaranteed by its partners/managing partners, for its guarantee function and for constituting an expedient and practical means of mobilizing (and in the event of breach, enforcing) the execution of contracts with the company, particularly the granting of loans, mainly in the context of private limited companies.

This Alert exposes, summarily, the most relevant points regarding the significance, terms and grounds for this decision.

Question to be resolved by the SCJ

Whether, and under what terms, the unilateral termination of the guarantee provided by a partner or managing partner, who provides an “aval” on a blank promissory note, is admissible after exiting the company.

Response conveyed by the SCJ

The SCJ's uniform decision was to the effect that such unbinding is possible by means of a unilateral communication to be made in the following main terms:

• It has to be executed prior to the time the creditor completes the instrument under the terms of the authorization/filling agreement.
• It must be within a long-term commitment (which emerges from the authorization/filling agreement or the financing contract itself) with no fixed term or, if it is for a renewable term, termination is still possible once the initial term has elapsed without the guarantor in the blank instrument having the option to prevent the commitment from being renewed.
• It can be carried out within the framework of bank financing contracts in which the financial flow that determines the exchange-guaranteed debt depends on the requests made by the company to the bank at each given time (as is the case, for example, in the case of line of credit or current account contracts).
• It cannot be achieved in cases wherein the guaranteed debt is predetermined (as is the case, for example, wherein the promissory note is guaranteed in blank to secure a leasing contract or a bank loan contract).
• The release from the obligations of the guarantee will only be effective for the future, i.e. in relation to the liability of the partner/managing partner as guarantor for amounts requested by the company after the termination has taken effect, which further means that the promissory note can be completed and therein included all credits resulting from transactions executed prior to the termination taking effect.
• The exercise of the option to unilaterally communicate the termination of the guarantee must be in accordance with good faith, and the departure of the partner or managing partner from the guaranteed company makes it possible to affirm such conformity.

Main arguments supported by the SCJ

The SCJ's uniform decision is based on the following main arguments:

• The signature affixed to a blank promissory note, which is intended to be used as an exchange guarantee after the promissory note has been completed, is not yet a true guarantee, it does not constitute an exchange instrument obligation and, as such, the issue of the release cannot be resolved having the specificities of exchange instrument obligations in consideration, as if we were dealing with a guarantee affixed to a completed instrument.
• The release is placed and verified at the level of the authorization agreement to fill the blank promissory note and produces its effects outside of the scope of the exchange instrument bond, and only regarding the authorization agreement to fill in the blank promissory note, and not on the promissory note.
• The parties’ freedom of contract cannot be reconciled with the perpetuity of contractual bonds.
• The interests of the creditor bank are not affected in an intolerable manner, since the effectiveness of the termination/release is projected only into the future, the creditor bank maintains the guarantees in relation to the credit already granted to the company. Accruing, the creditor continues to have sufficient mechanisms at its disposal to defend its interests. In order to avoid the release of new tranches of financing, the creditor bank may invoke the exception of non-compliance, termination or even modification of the financing contract due to a change in circumstances, as well as being able to anticipate, in the authorization agreement, the consequences of the guarantor's divestiture.
• It is not reasonable for the creditor bank to want to retain former partners/ managing partners who have already left the company, nor for the company to continue to benefit from the guarantee of partners/managing partners who have already exited.

Comments

• This is not the first time that the SCJ has ruled to standardize judicial decisions on this issue. It had addressed it on the SR no. 4/2013, of 21.01, but it did so, according to some, in terms that raised doubt and debate as to whether such a standardizing decision (which led to a result opposed to the one now established) also applied to the "blank guarantor" understood to be in a position, prior to the completion of the instrument, of not being an exchange obligor and the "blank guarantee" as not yet being a of an exchange binding nature.
• It was therefore with the declared purpose of avoiding misunderstandings that the SCJ set out in SR no. 1/2025 to revisit this theme.
• The standardizing ruling now established by the SCJ in SR no. 1/2025 – as to allow the release of the former partner or former managing partner that issues a guarantee by “aval” in a blank promissory note in the terms as per the grounds now set – is not innovative, stemming from a thesis that, for some years, has been affirmed and developed by some legal scholars and case law.
• Although the most technically appropriate means of mobilizing the guarantor’s release may be debatable for those that defend the thesis – whether it is termination by unilateral communication, according to the solution now adopted by the SCJ, or if, among others, it constitutes a termination due to unenforceability, just cause or due to change in circumstances –, it appears that the option of unilateral termination communication adopted by the SCJ was aimed to covering the widest range of factual circumstances that require similar protection because in its decision, effectively, the SCJ takes the view that the loss of the quality of partner/managing partner by the guarantor cannot, in itself, customarily, be considered as a just cause for termination, nor is it sufficiently unforeseeable to allow recourse to the change of circumstances exception.       
• Regardless of this technical discussion as to the most adequate means of triggering the release, which underpins some of the losing votes of the SCJ Judges who took part in the decision, this uniform decision highlights a general consensus in the SCJ as to the admissibility of the legal protection to be afforded to the partner-guarantor in these cases.
• Lastly, this decision shall constitute an alert to funding entities to reinforce the caution required in the drafting of the authorization agreements to complete blank promissory notes (and respective financing contracts), to safeguard against possible negative impacts arising from the interpretation now set by this standardization ruling, which not being innovative, is now reinforced.