Applicability of 295 for extending Corp.Guarantee U/s 372A

Dear All

 

One listed company formed a Special Purpose Vehicle (SPV is a public limited Company) and in that SPV, it will hold not less than 26 % in equity and also 51% of the produce of the SPV will captively consumed by the Listed Company.

Now the listed entity is extending a Corporate Guarantee for the Loan taken by the SPV, which will definitely attracts the provisions of 372 A as the amount of loan is very high. And the requisite approval of the members in the General meeting will be obtained in the due course.

 My queries are

 1. Any other guidelines / rules / procedures / approvals  that are needed to be obtained/followed  for extending the Corporate Guarantee apart from the approval of the members in the General meeting u/s 372A.

 

2. As all the Board of Directors of SPV are Directors in the Listed company, the permission from the Central Government u/s 295 is required as the Corporate Guarantee will be treated as Loans to Directors?

 3. if the permission is required then previous approval is necessary ?

 Thanks in advance

 

 

 

Replies (2)

the approval of financial institution as per 372A is necessary if listed co. in this case have secured/unsecured loans

and also CG approval is required bcoz sec.295 is attracted  having common directors. this is my view...

experts views are invited

thanks 

Hi,

Just to add;

Section 295 will not be applicable in case any guarantee given or security provided - by a holding company in respect of any loan made to its subsidiary.

Normally SPV formed for acquiring foreign companies, if so, FEMA guideiness should be complied with respect to financial commitment, under automatic route, is allowed upto 400% of Networth.......

 

Regards

Jaideep Pandya

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