Independent guarantees under Law No. 223-FZ: checking customer requirements
A bank template and amount check are insufficient for Law No. 223-FZ procurement. Customers may set different guarantor, validity, payment, document, claim and wording requirements. Where to find conditions and check a guarantee before signing.
In ordinary Law No. 223-FZ procurement, terms follow the Civil Code, customer procurement rules, notice, documents and draft agreement.
Competitive SME-only procurement additionally follows Article 3.4 requirements for guarantors, registration, irrevocability, validity and payments.
What is an independent guarantee under Law No. 223-FZ?
A written undertaking to pay the customer a specified amount when conditions in the guarantee arise.
Three parties are involved:
Obtains the guarantee, pays fees and fulfils contractual obligations.
Accepts security and may claim from the guarantor following a breach.
Issues an independent undertaking and is liable up to the guarantee amount.
A guarantee may secure:
- a procurement bid;
- the winner entering the contract;
- main agreement performance;
- advance repayment;
- warranty obligations;
- a stage or group of obligations.
A document called a performance guarantee may cover only some required obligations. Check every clause.
Differences from a Law No. 44-FZ guarantee
| Criterion | Law No. 44-FZ procurement | Law No. 223-FZ procurement |
|---|---|---|
| Main requirements source | Law No. 44-FZ, standard forms and regulations | Customer procurement rules, documents, notice, draft agreement and Russian Civil Code |
| Standardisation | Largely standardised requirements | Terms may vary significantly between customers. |
| Guarantor requirements | Set by law | Depend on procurement regime and customer requirements |
| Guarantee register | Statutory register applies | Mandatory for SME procurement under Article 3.4; otherwise check procurement documents. |
| Validity period | Statutory rules apply | Ordinary procurement follows documentation; SME-only procurement has a special rule. |
| Document form | Prescribed standard forms | Often a customer form or agreed wording; mandatory approved forms also apply in SME-only procurement. |
Even a legally valid guarantee may be rejected if it fails to meet specific procurement requirements.
Two guarantee regimes under Law No. 223-FZ
Read procurement rules, notice, documents, draft agreement and guarantee form. Special Article 3.4 requirements may not apply.
Article 3.4 governs guarantors, registration, irrevocability, payments and validity.
First question before approaching a bank: is participation restricted to small and medium-sized enterprises .
The answer affects:
- eligible guarantors;
- register entry;
- mandatory wording;
- minimum validity;
- customer payment procedure;
- grounds for refusing acceptance.
Where to find customer requirements
The procurement listing or short notice alone is insufficient. Requirements may appear across several documents.
Customer rules, security methods and guarantee requirements.
Amount, procedure and submission deadline.
Detailed requirements, payment grounds and form.
Obligations, liability, performance period and security refund.
Customer replies, amendments and revised conditions.
Fixed sum or percentage of price.
Before signing, alongside signing or another specified date.
Performance, advance repayment, penalties or warranty period.
Delivery, work completion, stage or warranty end date.
Bank list, rating, licence or other criteria.
Mandatory template or required clauses.
The customer may amend amount, term, draft agreement or form. Give the bank the current set.
General Civil Code requirements
Every guarantee must identify the main elements of its undertaking.
| Check | Required information | Error risk |
|---|---|---|
| Issue date | Specific issue date | Issue and effectiveness cannot be determined. |
| Principal | Supplier, contractor or service provider | A different entity’s obligation is secured. |
| Beneficiary | Customer receiving the guarantee | Wrong beneficiary |
| Guarantor | Full guarantor details | The liable party cannot be identified. |
| Underlying obligation | Agreement and secured obligations | Wrong agreement or incomplete coverage |
| Monetary amount | Payment amount or calculation method | The guarantor’s liability limit is unclear. |
| Validity period | Start and end of the undertaking | Expiry before the customer’s risk ends |
| Payment grounds | Circumstances triggering payment | The customer cannot make a compliant claim. |
The amount may increase or decrease automatically upon a specified event.
This matters for staged performance, advance repayment and long contracts.
Special rules for SME-only procurement
Law No. 223-FZ standardises competitive procurement restricted to SMEs more closely.
The guarantor must meet Article 45 of Law No. 44-FZ requirements.
Information must enter the statutory register.
The guarantor cannot unilaterally revoke the document.
A compliant claim must be paid within the statutory period.
Performance security remains valid at least one month beyond the underlying obligation period.
The customer cannot be required to provide a judgment proving the supplier’s breach.
SME-only forms must comply with Article 3.4 and the mandatory approved-form requirements under Russian Government Resolution No. 1397.
Calculating guarantee validity
Ordinary Law No. 223-FZ procurement has no universal statutory period for all performance guarantees. Apply the customer’s specified period.
In SME-only procurement, performance guarantees must remain valid at least one month after the secured underlying obligation’s expiry.
Factors in the calculation
- goods delivery period;
- work period;
- performance stages;
- final acceptance;
- remedying defects;
- advance repayment;
- warranty obligations;
- possible agreement extension;
- express document requirements.
Illustrative example
If the secured obligation ends with delivery on 30 November, the guarantee must not expire before the minimum additional month ends.
The customer may require longer validity for acceptance, defect correction or other obligations.
Cover the specific documented obligation rather than arbitrarily taking a date from the agreement’s title section.
Checking the guarantee amount
If security is required, its amount must be specified in the notice and documents.
It may be:
- a fixed amount;
- a percentage of the starting price;
- a percentage of the final agreement price;
- the advance amount;
- an increased amount following a significant price reduction;
- a separate warranty amount.
An increased amount following a large bid discount must follow procurement rules, notice or documents under Law No. 223-FZ.
Checks after bidding
Security may depend on the winner’s price.
Security may be linked to the advance.
Check the discount threshold and increase factor.
Performance and warranty may be secured separately.
Checking the guarantor and register
For SME-only procurement, verify an eligible guarantor and an independent guarantee register entry.
For other procurement, follow customer requirements, which may include:
- bank eligibility;
- minimum credit rating;
- licence;
- capital requirements;
- a specific register;
- advance guarantor approval;
- electronic document format restrictions.
Check principal, beneficiary, amount, validity, guarantor and secured obligation.
Risky guarantee clauses
Delivery is covered but penalties, advance repayment or warranty obligations are not.
Payment requires documents not specified in procurement requirements.
A judgment is demanded before payment despite the SME procurement prohibition.
Expiry at delivery, without acceptance or the required additional period.
A branch, management company or another legal entity is named.
The guarantor may terminate without customer consent.
Only one submission channel is permitted, contrary to procurement requirements.
Notice, draft agreement and form show different amounts or periods.
The bank assesses its own risk and prepares the document; compliance with the procurement must be checked separately.
What banks check before issue
Revenue, profit, cash flow and balance sheet structure.
Loans, leasing, existing guarantees and sureties.
Ability to supply goods, work or services.
Procurement terms, acceptance and possible claims.
Comparable agreements, timing and quality.
Suppliers, staff, equipment, warehousing and working capital.
Disputes, recovery, insolvency indicators and enforcement.
Surety, collateral, deposit or unsecured limit.
Documents to prepare
- procurement notice and documents;
- draft agreement;
- customer guarantee form;
- final procurement decision record;
- customer procurement rules;
- financial statements and tax returns;
- management accounts;
- bank statements;
- existing obligation details;
- supplier and subcontractor agreements;
- proposed security documents;
- similar delivery experience.
Why the customer may refuse a guarantee
The bank used its own template rather than the required form.
Advance, final bidding price or anti-dumping terms overlooked.
Expiry precedes the customer’s required date.
The bank fails statutory or customer criteria.
The SME procurement guarantee is absent from the prescribed register.
Extra conditions or documents are added.
Step-by-step checking process
Determine whether participation is SME-only or general.
Download rules, notice, documents, draft and clarifications.
List amount, validity, guarantor, obligations and form.
Allow for the bidding result, advance and any increase.
Avoid outdated forms or drafts.
Compare every term with customer requirements and legislation.
For SME procurement, confirm a correct entry.
Do not wait until the final signing day.
Approach with a prepared checklist rather than expect the bank to identify every procurement condition.
When to seek help
Checks are particularly useful for complex customer forms, limited signing time or substantial security.
Help may also be needed when:
- several banks have declined;
- the bank proposes changing the customer’s form;
- documents conflict;
- participation is SME-only;
- advance repayment is required;
- increased security applies;
- a guarantee and loan are needed together;
- a large guarantee limit is needed.
Check the guarantee before submitting it
NG Finance helps Russian LLCs and individual entrepreneurs analyse requirements, check amounts and validity, prepare documents and identify a realistic guarantee option.
The guarantee can be considered alongside delivery and working capital finance where needed.
Submit a requestFrequently asked questions
Are requirements identical for all Law No. 223-FZ procurement?
No. Ordinary procurement largely follows customer requirements; competitive SME-only procurement has special Article 3.4 rules.
Must the customer’s form be used?
Where a form or clauses are mandatory, the bank draft must comply, subject to statutory requirements and approved standard forms for SME-only procurement.
Must the guarantee be registered?
SME-only guarantees must be included in the prescribed register. Read the documents for other procurement.
How long must the guarantee be valid?
Ordinary procurement follows customer rules and documents. SME-only performance guarantees require at least one month beyond the underlying obligation period.
Can a Law No. 44-FZ form be used?
Only if it also satisfies the specific Law No. 223-FZ procurement. Mechanical reuse risks rejection.
Can the customer require a specific bank?
This depends on the regime, procurement rules and mandatory law. Assess the clause individually.
Can the bank change the customer’s form?
Banks may propose wording aligned with their policies. Before issue, confirm it remains compliant with procurement requirements.
What if the bank declines shortly before signing?
A bank rejection generally does not remove the winner’s duty to provide security. Start early.
Can a guarantee be replaced with cash?
Choice and replacement depend on procurement rules, documents and the agreement.
Does a guarantee provide funds for delivery?
No. It secures obligations but does not finance goods, materials, payroll or logistics.
This article provides general information. Terms, guarantor eligibility, amount, validity, form, registration and submission depend on the procurement regime and documents. Prepared using public sources: Article 3.4 of Law No. 223-FZ , Article 4 of Law No. 223-FZ , Article 368 of the Russian Civil Code , Section 6, Chapter 23 of the Russian Civil Code , Unified Procurement Information System (EIS) .