Page 48 - MONACO LAW REVIEW 2025-2

CASE NOTE
Hypothecary Suretyship Granted by a
Civil Company to Secure the Debts of One
of Its Partners
Court of Revision, 30 June 2025, SCI POSA v. Société
GAMA ADVISERY SERVICES LTD, No. 2025/19
The assessment of the conditions governing the validity of
a hypothecary suretyship granted by a civil company to
secure the debts of one of its partners has generated extensive
litigation in France, which is hardly surprising given the
practical signifi cance of this type of security. Before handing
down, on 30 June 2025, a decision taking a position on that
point of law, the Court of Revision had not had the opportunity
to rule on the validity of a hypothecary security granted by
a civil company to guarantee the debt of one of its partners.
By doing so, it departs from the solutions adopted in France,
where such issues have generated extensive litigation. French
case law1 requires that a company’s suretyship be valid only
if it falls directly within the corporate objects, or if there
exists a community of interests between the company and
the debtor, or if it results from the unanimous consent of the
partners. It later held that a company’s suretyship is invalid
where it heavily encumbers its assets without any economic
justifi cation and without receiving any consideration in
return2, thereby exposing the company to a risk of complete
depletion. French courts3 also controversially rejected the
notion of real suretyship (cautionnement réel), subsequently
codifi ed by Article 2325(2) of the French Civil Code, under
which a creditor may act only against the asset given as
security, without any personal undertaking by the surety.
These rules were invoked before the Monegasque courts, and
the lower courts applied them without questioning whether
they were transposable to Monaco. The Court of Revision
rejected this approach and laid down two new principles. The
fi rst concerns the conditions for the validity of a hypothecary
security granted by a civil company; the second concerns the
recognition in Monaco of real suretyship.
In this case, a civil company had undertaken a promise to
grant a hypothecary security over its sole immovable asset
to secure the debt of its principal partner, and the Court of
Appeal had held that undertaking to be effective. The appeal
criticised this, arguing that a security granted by a company
for the debt of another, where it does not fall directly within
the company’s corporate objects and does not result from
the unanimous consent of the partners, is valid only if there
exists a community of interests between the company and the
1| French Court of Cassation, First Civil Chamber, 8 Nov. 2007, Appeal No. 04-17.893.
2| French Court of Cassation, Commercial Chamber, 8 Nov. 2011, Appeal No. 10-24.438.
3| French Court of Cassation, Mixed Chamber, 2 Dec. 2005, No. 03-18.210 ;
French Court of Cassation, Commercial Chamber, 17 June 2020, No. 19-13.153.
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secured debtor — which, it submitted, was precisely lacking
here. It further argued that a security granted by a civil
company to secure a partner’s debt cannot be valid where
it is such as to jeopardise the very existence of the company.
Where the Court of Appeal had sought to neutralise these
objections through its reasoning, the Court of Revision
held the lower court’s approach — which subordinated the
validity of the guarantee granted by the SCI (property holding
company) to the dual requirement that there be a community
of interests between the surety company and the secured
debtor and that the security not jeopardise the company’s
existence — to be “incorrect but unnecessary”. As the Court
of Appeal had noted, the company’s articles of association
vested its executive managers with “signature authority”,
enabling them to use it “for all the needs and affairs of the
company”, and expressly empowered them to carry out, inter
alia, “hypothecary allocations (…) and all other acts concerning
the company”. The executive manager was therefore able to
undertake to grant hypothecary security over the company’s
immovable property, and the Court of Appeal was correct
to uphold the validity of the hypothecary entries made in
execution of that undertaking, without needing to consider
whether the security complied with the company’s corporate
interest.
The SCI further criticised the judgment for having held it liable
as if it had itself become the debtor, rather than on the basis
of real suretyship, even though the granting of real security
over immovable property to secure another’s debt normally
imposes on the provider only the obligation to suffer the
forced sale of the encumbered asset. Referring to the Court
of Appeal’s sovereign assessment of the undertaking given,
the Court of Revision held that the SCI had indeed rendered
itself liable as debtor in the event of default by the principal
debtor and dismissed the plea. The decision thus enshrines in
Monaco the notion of real suretyship, whose abandonment
by the French Cour de cassation is widely regretted by
serious commentators, since it is self-evident that a person
who grants real security to guarantee a debtor’s obligation
thereby undertakes a personal commitment to pay that
obligation. The undertaking to pay another’s debt is therefore
a suretyship, and, because its effectiveness is reinforced by
real security, a real suretyship.
Beyond this nod to French case law — which has, wrongly,
rejected the classifi cation of real suretyship — the signifi cance
of the judgment lies above all in its refusal to import into
the Principality rules that are purely French in origin, being
based both on principles of French company law that have no
equivalent in Monaco and on a systematic policy of protecting
sureties which likewise has no place under Monegasque law.
The Monegasque Civil Code contains only a few provisions
governing the powers of the executive manager of a civil
company and remains rooted in a strongly contractual
conception of its articles of association, which freely
determine the organisation of the company, its representation