Enforceability of Corporate Guarantee?

[William Yeh]

Hey BP,

I'm considering investing with a group that does flips and they provide a corporate guarantee backed by both their liquid and non liquid assets on all investor funds that they accept.

While I have some familiarity with personal guarantees on loans received from banks, I've never dealt with a guarantee from the other side of the table. Does anyone have experience in having an investment guaranteed and the enforceability of such a guarantee? If the catastrophic happened, what's stopping the group from liquidating everything and closing up shop?

Thanks in advance.

[Neil Aggarwal]

The problem is the legal system in this country.  There is too many ways to get out of stuff.  You can get a judgement and record it but it can sit there forever.

[William Yeh]

Hey friends. Long story short the group was run by a scammer and the guarantee was worthless at the end of the day. We sued both the head of the group as well as the company. Both filed for bankruptcy and while we won our case, this guy made it impossible to get to any of his assets, assuming he had any left.

Luckily we made out OK on our investment in total but I have friends that didn't fare as well.

Moral of the story is watch out who you do business with and think 5 steps ahead in case your deal starts falling apart. As my dad says, in business assume everyone is guilty until proven innocent.

[Davido Davido]

@William Yeh,  Thank you for the update.  Very helpful