Surety Will Bear Responsibility for Unpaid Loan Only If They Are Family Members

Dear compatriots, I want to inform you that today the National Assembly adopted the legislative package aimed at revising the institution of suretyship in Armenia in the second reading and in its entirety.

In this regard, the message circulated by the ‘Enlightened Armenia’ party states: “According to this package, in the case of an individual surety (who is not a sole entrepreneur):

1. The surety will bear subsidiary (additional) liability instead of the principal debtor, meaning that if the borrower does not repay the loan, the bank must first demand from the borrower, and only then from the surety. First, the collateral must be sold, a seizure must be applied to the borrower's property, and only then can there be a seizure on the surety's property.
2. In the event of the borrower’s non-repayment of the loan, the surety can only bear joint liability if the borrower and the surety are family members, or if the loan is for joint activities, or if the surety is a shareholder, participant, executive body member, or actual beneficiary of the borrowing organization.
3. The suretyship agreement must necessarily define the maximum monetary amount of the surety's liability and the term of the surety. Obligations exceeding this amount cannot be imposed on the surety.
4. In the case of an increase in the surety’s liability or any other adverse consequences resulting from changes to the loan agreement, the written consent of the surety must be obtained; otherwise, the surety will not bear responsibility for the consequences of such changes. Conditions in the suretyship agreement that provide for the prior consent of the surety for the borrower’s future obligations will be void if all essential conditions are not defined in the loan agreement.
5. If the borrower fails to repay or improperly repays the loan, the bank will be obliged to notify the surety within three working days, indicating the deadline for the violation and the amount of the debt.

- writes Arkadi Khachatryan, a deputy of the Enlightened Armenia faction.