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Guarantee by Pvt Ltd company

khushboo (CS) (234 Points)

07 March 2011

Dear All

Can any one guid me that

If a Pvt Ltd Company having Paid up Capital of 8.5 Crores gives Gaurantee for a Bank Loan (approx 18 Crore amount) to other Pvt Ltd Company, in which relatives of Directors of Formal company are Directors and Shareholders in later company then which provisions of company law attracts here ???

Thanks In Advance

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SANTOSH SHAH (Company Secretary) (754 Points)
Replied 07 March 2011

Originally posted by : khushboo
	Dear All Can any one guid me that If a Pvt Ltd Company having Paid up Capital of 8.5 Crores gives Gaurantee for a Bank Loan (approx 18 Crore amount) to other Pvt Ltd Company, in which relatives of Directors of Formal company are Directors and Shareholders in later company then which provisions of company law attracts here ??? Thanks In Advance

Hi Khushboo,

Please check provisions of Section 372A , which is on Inter Corporate Loans, Investment, Guarantee and Securities in connection with a Loan.

regards

Santosh Shah

khushboo (CS) (234 Points)
Replied 07 March 2011

Mr Shah

Section 372 A ( 8) (8) Nothing contained in this section shall apply,

( iii) a private company, unless it is a subsidiary of a public company

its not applicable to my case.

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 07 March 2011

Originally posted by : khushboo
	Mr Shah Section 372 A ( 8) (8) Nothing contained in this section shall apply, ( iii) a private company, unless it is a subsidiary of a public company its not applicable to my case.

Oh yes, sorry ur's is a pvt ltd, 372A wont apply.

In case of pvt ltd i guess its articles which govern on guarantee.

Ours too is a pvt ltd and in case of giving guarantee, inter-corporate, its the Limits set by Articles.

So if ur articles has guarantee limits then fine, pass board resolution accordingly.

if not amend ur articles and grant guarantee within the limit set .

Experts view solicited.

regards

Santosh Shah

Rajeev kumar Nayak (ACS) (283 Points)
Replied 07 March 2011

Dear Khushboo,

As the Company is private company Section 372 will not be applicable. Section 295 will also be not applicable as the company is private company.

Thus in the given situation, Section 299 will be applicable. Mr. Director will just disclose the interest in the Board meeting where the guarantee to other company will be considered.

Thanks

Rajeev Nayak

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 09 March 2011

Agree with Rajeev. Being a private company, neither the provisions of Section 372A nor Section 295 will be applicable.

Disclosure of interest is required u/s 299, however only if the shareholding of any of the directors of one company or two or more of them exceeds 2% of the paid up share capital in the other company.