Under the Bevaris Alliance agreement, what is the impact of the Franchisee's bankruptcy on the Individual's guarantee?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
uch obligations, or pay such sums on the due date, or the Individual's failure to comply with the provisions of clause 22.1(a), clause 22.1(b) and clause 22.1(c).
- 22.2 Before making a demand under clause 22.1, it shall not be necessary for the Franchisor to have made a demand on, taken out proceedings against, or taken any action to enforce any security against the Franchisee or any other person.
- 22.3 The Individual's liability under this clause 22 shall be joint and several and shall not be reduced, discharged or adversely affected in any way, by:
- (a) any unenforceability, invalidity, irregularity, frustration or discharge by operation of law of any of the Franchisee's obligations under this agreement; or
- (b) any legal limitation, disability, incapacity or other circumstances relating to the Franchisee or any other person; or
- (c) the Franchisor compromising, varying, extending, dealing with, renewing, releasing, refusing or neglecting to perfect or enforce any right, remedy or security against the Franchisee or any other person in respect of this agreement or any other document or security; or
- (d) anything which, but for this provision, might discharge, reduce or extinguish any of the Individual's liabilities under this clause 22.
- 22.4 The Individual's guarantee is a continuing guarantee and shall continue in effect until the Franchisee has paid and performed all sums and all obligations under this agreement.
- 22.5 The Individual shall not, until all of the Franchisee's obligations under this agreement have been finally performed and paid in full, exercise any right:
- (a) of subrogation and indemnity; or
- (b) to take the benefit of, share in or enforce any security or other guarantee or indemnity for any of the Franchisee's obligations; or
- (c) to prove in the liquidation of the Franchisee, other than in accordance with the Franchisor's instructions.
- 22.6 If the Individual exercises any of the rights referred to in clause 22.5, he or she shall:
- (a) hold any amounts recovered on trust for the Franchisor; and
- (b) pay them to the Franchisor on demand.
Source: Item 23 — RECEIPT (FDD pages 22–88)
What This Means (2024 FDD)
According to the 2024 Bevaris Alliance Franchise Disclosure Document, the Individual's guarantee remains in effect even if the Franchisee declares bankruptcy. Specifically, the Individual's liability as a guarantor is not reduced, discharged, or adversely affected by the bankruptcy or insolvency of the Franchisee. This means that the Individual's obligation to cover the Franchisee's debts and performance under the franchise agreement continues, regardless of the Franchisee's financial status. The Individual's guarantee is a continuing guarantee and remains in effect until the Franchisee has fully paid and performed all obligations under the agreement.
Furthermore, the Individual is restricted from exercising certain rights until all of the Franchisee's obligations are met. These include rights of subrogation and indemnity, taking benefit from any security related to the Franchisee's obligations, and proving in the liquidation of the Franchisee, unless instructed by Bevaris Alliance. If the Individual does exercise any of these rights, any recovered amounts must be held in trust for Bevaris Alliance and paid on demand.
In addition to the guarantee, the Individual has ongoing responsibilities during the term of the agreement. These include ensuring the Franchisee performs all obligations, devoting full-time attention to the Franchisee's business, serving as a director, officer, or managing member of the Franchisee, and holding more than 50% of the Franchisee's voting capital. The Individual cannot assign or transfer any rights or obligations under the agreement.
Moreover, the agreement specifies that if the Franchisee or the Individual suspends payments, is deemed insolvent or bankrupt, or commences negotiations with creditors, it constitutes grounds for termination of the agreement by Bevaris Alliance. This highlights the importance of the Individual's financial stability and involvement in the Franchisee's business operations.