When it is a Deed of Cross-Guarantee


A Deed of Cross Guarantee is ASIC’s standard form document intended to free a corporate group from the chore of filing separate accounts for each wholly owned subsidiary. Provided relevant group companies have signed the Deed, they are exempt from filing. The Deed can easily be confused with a full financial Guarantee and Indemnity, whose purpose is specifically to reduce credit risk.  Financiers should be aware that the Deed of Cross Guarantee does not provide the same credit support as a conventional Guarantee & Indemnity.

The Law

Under section 292(1) of the Corporations Act, all public companies and large proprietary companies must prepare an annual financial statement and a directors’ report. This can be an onerous obligation where a corporate group has numerous subsidiaries. So, under section 341, ASIC can grant an exemption order in respect of the specified class of companies. Exemptions such as these are described as “class orders”. Class Order 2016/785 currently provides relief to wholly-owned subsidiaries from the requirement of lodging financial reports, provided:

  • the group execute the standard form Deed of Cross Guarantee;
  • The holding company’s directors lodge a written resolution in which they state they believe that the subsidiary members of the cross-guarantee group can meet their obligations or liabilities under the Deed;
  • a lawyer has certified that the relevant Deed’s wording is in accordance with the ASIC pro-forma; and
  • the holding company prepares and lodges audited financial statements for the group as a whole.

So, in the event of the group’s financial distress, creditors of each subsidiary gain indirect rights against the assets of the holding company, thanks to the group’s Deed of Cross Guarantee. The prospect of exercising such rights is intended to focus the minds of the holding company’s directors on signing off on proper group accounts, as well as providing reassurance to outside creditors about the absence of filed financial statements for an individual group subsidiary.

Risks for financiers

Problems can arise when financiers, brokers and others wish to rely on a Deed of Cross Guarantee in the same way as they do a conventional Guarantee & Indemnity. This is because of the specific way in which the Deed of Cross Guarantee must be drafted:

  • a subsidiary can revoke its participation in the Deed any time: all that is required is a public advertisement. There is no direct notice to creditors, so they may never become aware;
  • unlike a conventional Guarantee & Indemnity, a Deed of Cross Guarantee is not enforceable immediately; a creditor may need to wait at least until the winding-up of the relevant subsidiary takes place;
  • again unlike a conventional Guarantee & Indemnity, there is no separate indemnity clause; this is important if a debt becomes partly or wholly unenforceable for any reason;
  • there is no provision imposing an interest charge on overdue money;
  • standard provisions for suspending a guarantor’s rights to reduce its liability by a defence or utilising a set-off are absent;
  • there is no power of attorney in favour of creditors enabling them to do things in the name of the guarantor; and
  • there is no provision to recover legal and other enforcement costs.


An ASIC pro-forma Deed of Cross Guarantee should not be confused with, or relied upon as, a properly drafted, full financial Guarantee & Indemnity. Both documents, although in the form of deeds, are intended to serve very different purposes. It is not helpful to lenders and brokers that the documents are captioned so similarly.

If you or someone you know wants more information or needs help or advice, please contact me on 02 8035 5200 or email [email protected].