Guaratee by pvt. ltd. co. for third party

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Querist : Anonymous

Querist : Anonymous (Querist)

29 December 2012 Hi friends,

Can a private limited co. give guarantee for a third party ,i.e, for a person who is not director / shareholder / relative of share holder or director.

If yes, are there any restriction on giving guarantee? For eg. applicability of section 372A or any other sections.

Please give your opinion.

Ajay Mishra

Ajay Mishra (Expert)
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29 December 2012 Hi

Yes.

Non-applicability of section 372A
Sub section (8) of section 372A provides that the conditions of section 372A shall not apply in the following situations and the transactions of making of loans or investments, giving of guarantee and providing security which are outside the provisions of section 372A of the Act are as under:—
(a) to any loan made, any guarantee given, or any security provided, or any investment made by:
(i) a banking company, or an insurance company, or a housing finance company in the ordinary course of its business, or a company established with the object of financing industrial enterprises, or of providing infrastructure facilities;
(ii) a company whose principal business is the acquisition of shares, stocks, debenture or other securities;
(iii) a private company unless it is a subsidiary of a public company.
(b) to investment made in shares allotted in pursuance of clause (a) of sub-section (1) of section 81 of the Companies Act, 1956;
(c) to any loan made by a holding company to its wholly owned subsidiary;
(d) to any guarantee given or security provided by a holding company in respect of a loan made to its wholly-owned subsidiary;
(e) to acquisition by a holding company, by way of subscription, purchase or otherwise, the securities of its wholly owned subsidiary.

Querist : Anonymous

Querist : Anonymous (Querist)

29 December 2012 Thank you for your reply sir, from your reply i am understanding following-

- Pvt. ltd. co. can give guarantee on behalf of third party without any restriction.

Is my understanding correct? If i am wrong please correct me.

Ajay Mishra

Ajay Mishra (Expert)
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29 December 2012 Yes, can give guarantee.

Querist : Anonymous

Querist : Anonymous (Querist)

29 December 2012 Thank you again.

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