As per section 372A, a company can give loan, make investments, give guarantee or provide security to any other body corporate.
How giving guarantee or providing security is related to investment by the company?
1 Replies
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 19 August 2012
the language of the section 372A reads as follows:
(1) No company shall, directly or indirectly,-
here the word indirectly should also be given importance. When a company gives any gurantee on behalf of the loan taken by another company it is indirectly going to bear the cost for repayment of the loan if the other company fails to make the payment of the loan as the company has given gurantee to the lender to make the repayment the loan. So here the company is indirectly bearing the burden of repayment of loan.
Same way it is applicable for security also.
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