2010-05-17
Amendments to the Civil Code: Creditors Cannot Directly Claim for Performance from Guarantors
On 27 April 2010, Taiwan’s Legislative Yuan approved amendments to the Civil Code that stipulate that creditors cannot directly claim for performance from guarantors because the principal debtor has evaded his/her debt liability.
According to Article 745 of the Civil Code, a guarantor may refuse performance where the creditor has not initiated proceedings for compulsory execution against the property of the principal debtor without result. Further, the original Subparagraph 2, Article 746 of the Civil Code states that if, after the conclusion of the contract of guaranty, claims for performance against the principal debtor have become difficult due to a change of his/her domicile or his/her business office, or his/her residence, the guarantor cannot raise as a defense the protection of Article 745. However, the original Subparagraph 2, Article 746 of the Civil Code has seriously infringed the rights of guarantors so and as such the Legislative Yuan has passed the amendment and deleted this Subparagraph.
In addition, the amendment stipulates that a director, supervisor or any other representative of a company who acts as the company’s guarantor will merely be responsible for the debt that has occurred during his/her time in office.
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