Company act section 185

 

Seek advise on the below scenario for common collateral issue:

 

- 2 Pvt Ltd, companies namely- M.Company A and  Company B

- Company A and Company B have both common directors. 5 Directors each. 

- No shareholding of company A in company B and vice versa. No other LLP or company invested in company A.

- Company A wants to give corporate security to company B. 

- Paid up capital of company A is Rs 25 lakhs.

 

Current scenario:

- Now both companies wants to avail cash Credit limit from with us and property is common to both loans.

- Property is in the name of company A. 

 

seek advise is it possible as per company act.

Replies (2)

If the Company A wants to give guarantee for loan availed by Company B, the provisions u need to comply with in your case is Section 186. Also u need to compy with Section 188 for related party transactions.

Checkl list of important provisions - Section 186

1. Ensure that the company A has not default in the repayment of any deposits or in payment of interest. If there is default, not eligible to give guarantee

2. Check whether the guarantee exceeds 60% fo paid up share capital + free reserves + securities premium account or 100% of F.R and S.P.A whichever is more. If exceeded, then approval of shareholders by special resolution is required

If the Company A wants to give guarantee for loan availed by Company B, the provisions u need to comply with in your case is Section 186. Also u need to compy with Section 188 for related party transactions.

Checkl list of important provisions - Section 186

1. Ensure that the company A has not default in the repayment of any deposits or in payment of interest. If there is default, not eligible to give guarantee

2. Check whether the guarantee exceeds 60% fo paid up share capital + free reserves + securities premium account or 100% of F.R and S.P.A whichever is more. If exceeded, then approval of shareholders by special resolution is required

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