Sec 185_guarantee

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This query is : Resolved

Pranay Patel (Querist)

01 May 2014 Respected Members,

Please give your opinion on my following query;

PQR Private Limited has given corporate guarantee/ security to ABC Private Limited for ABC's loan from a nationalized bank, before 12.09.2013.

Now, PQR wants to replace the security provided by them with some other property, no other alteration or modification is to be done, only property secured is to be replaced. whether this can be done or no.

As per my understanding it can done, since this is just a replacement of guarantee of a loan which was secured before 12.09.2013, i mean before the notification of Section 185 of CA, 2013.

Please share your views.

Thanks
Pranay Patel

Nikhil Kaushik

Nikhil Kaushik (Expert)

02 May 2014 you are not supposed to rollover obligations. change in security requires fresh documentation and would fall under the ambit of violating 185.

Pranay Patel

Pranay Patel (Querist)

02 May 2014 Nikhil Sir, thanks for your reply.

I understand that fresh documentation will be required for changing the security and modification of charge will be filed by the company.

But if we consider it as a violation of sec. 185, this will restrict the right of a company to sell the property or dispose the property in any manner which a company can do at any point of time. Since this case was prior to notification of sec 185, a company may have a option to change its security with some other property.

Nikhil Kaushik

Nikhil Kaushik (Expert)

03 May 2014 how is restricting company's right to dispose of its property?

Pranay Patel

Pranay Patel (Querist)

07 May 2014 Sir,

If a company wants to sell(by any reason) a property which is secured as a corporate guarantee with a bank for some other company's loan. Then how can i sell that property without the knowledge of bank and by replacing it with some other property.

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