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Abstract
Loans with collateral have become one of the options for newly created businesses looking for more accessible and less expensive funding. Financial institutions, particularly banks, are hesitant to lend to companies that have been in operation for less than two years. Furthermore, obtaining guarantees from other businesses is one technique to improve a company’s credit score. Companies can acquire more competitive funding with a better credit rating. One way is to get a guarantee from the parent firm as a shareholder. This research looks at how different legal systems handle guarantees from the parent firm to subsidiaries. This study employs normative legal research techniques. According to the findings, offering assurances is a typical business practice. Companies that are new or have been in business for less than two years are given priority to provide guarantees. Unless a shareholder offers assurances to the subsidiary in the case of a default, the parent company or shareholders have no liability to the subsidiary. A joint venture agreement will govern the issuance of guarantees by the parent firm based in another country with other shareholders. The parties must agree on the choice of law to be used. If there is a dispute, then the choice of law is important. Choice of law also determines the choice of forum in resolving disputes.