Co. X Ltd.(unlisted) has given a guarantee on behalf of Co. Y Pvt. Ltd. (a joint
venture of Co. X - 45% and Co. Z - 55%, foreign listed co.)in favour of a Bank.
The Charge in respect of the loan has been filed with ROC.
Co. Y Pvt ltd is deemed to be a subsidiary of a public co by virtue of section
4(7).
Later on, Mr. A a director of Co. Y was also appointed as a director in Co. X.
Please tell me whether the provisions of Scetion 295 will be hit? It states that
the lending company cannot give guarantee or provide any security in connection
with a loan made by any other person to a private co of which any such director
is a director or member without previous approval of CG.
Kindly advise. What action can be taken now? Thanks
Preeti Gandhi
CAclubindia
