This is a real case that was handled by our bail bond experts…great! See what you can do with it.

The facts:

• This is a Performance Security request for a multi-million dollar subcontract
• Applicant/Principal is a long-established company
• They have successfully completed similar sized projects.
• The company has a modest net worth, but is on a profitable trend. The proportions are fine.
• Shareholders’ personal financial statements add more net worth to the picture.
• The company is owned by a father and a son. The son is the main shareholder.
• We notice that their SS numbers are separated by only a few digits
• The father has a substantial net worth. He has a small net worth as stated in his personal statement.
• The applicant has initiated the subcontract.
• The GC/obligee has a mandatory bond form, very tough. It effectively turns it into a forfeiture bond (the force completes the job and sends you the bill).
• The father has a living trust
• Su also indicated that he has a trust

Lots of moving parts. What are the problems?

1. Low company net worth. Too low for the size bonus requested.
2. “Closed” SS numbers imply that these people are immigrants (they received SS numbers at about the same time). Are they US citizens?
3. Subcontract started. Why were they allowed to start without a bonus? Degree of completion? acceptable job? Bills paid? Do we program?
4. Do we want to write a forfeiture bond form (financial guarantee?)
5. What assets are in the trusts? Can you give compensation? Will we trust the compensation of a trust?

– Think about your possible solutions –

This is the approach elaborated by our subscribers:

1. Low company net worth. We do not prefer to require guarantees because it can be counterproductive and make it difficult for the client to complete the project. Instead, the client agreed to add capital to the company, an investment in its future. The funds could be a subordinated shareholder loan, or a stronger method: additional paid-in capital. The latter is more permanent and therefore desirable. The client agreed to a permanent capital that would be verified in writing by his CPA and supported by a current interim balance sheet.
2. Close SS numbers. Why would we ask for anyone with a social security number? it’s because he number itselff does not prove citizenship or filing a US tax return Non-citizens authorized to work in the US can obtain an SS#. “Tax residents” are permanent residents and green card holders who are not citizens liable to pay US taxes. All warranties are cautious when taking personal compensation from a non-citizen. They can easily flee the country to evade their obligations. For this reason, we determined that the father and son were immigrants, as we suspected, and naturalized US citizens.
3. Subcontract started. This would be clarified by obtaining our All’s Right Letter from the creditor, stating the relevant facts about the project (degree of completion, on time, without problems, etc.)
4. Bad link form. We had previous dealings with this major GC and negotiated a bond modification that made the bond operate more normally. They agreed to use the bonus mod again.
5. Trusts. It turned out that there was only one trust. The son was the beneficiary of the father’s trust, no separate trust of his own. A review of the father’s trust showed that signing the severance agreement was not prohibited. However, living trusts are revocable, which means that terms can be changed and assets can be moved, making them unreliable indemnities. And it contained the most important asset, the father’s residence. How to overcome this last obstacle? Our solution: We will place a lien on the property that gives us access regardless of changes to the trust.

There you go. Did you find solutions to match ours? It was a difficult/complicated case, but we worked hard to resolve it.

We will work hard to solve his bond cases as well. Bonds of offer, compliance and payment, and also solar and lottery!

Include us in your bonus production efforts. We can make it happen.