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WHAT IS CORPORATE GUARANTEE?

A guarantee or security provided by a body corporate for any loan made to body corporate or any loan Scenarios in which corporate guarantee might be needed 1 As a security What are the documents required when corporate guarantee is taken as security?

1 Board Resolution of CG empowering it to execute corporate gurantee. 2 MOA/AOA of CG empowering it to give Corporate guarantee. 3 Stautory Auditor Certificate of Corporate guarantor for complying with section 372A and 295 of comp

SECTION 372A OF COMPANIES ACT Section 372A of Companies Act, 1956 needs Companies Act to be complied with when there is a intercorporate loan and investment and if there is a guarantee / security given by a company for another company. In case the section is applicable to a particular transaction then the statutory auditors or chartered accountants certificate needs to be obtained confirming that the limits so mentioned in the said provision of law are not breached by the company due to the guarantee given by the said company for securing the debt/ obligation of another company towards ICICI Bank. Where the section is not applicable to a company, a certificate to that effect is to be submitted from the Statutory Thus 372A applies to 1 Security provided 2 Guarantee provided or 3 Any loans or investment made in connection with any loan made by any other person to, or to any other person, by any body corporate; WHEN SHAREHOLDER'S RESOLUTION IS REQUIRED?

This is the special resolution to be passed by shareholders of the company in the general meeting there by increasing the limits exceeding 60% of the paid-up share capital of the company of 100% of the free reserves, which ever is more, in order to give intercorporate loans, Investments, Guarantee in relation to the loan granted by a lender to another company. The certificate from the statutory auditor or chartered accountant has to be obtained certifying that the obligation undertaken by such company is well within the limits so mentioned in the resolution passed under section 372 A of Companies Act, 1956.

DOES NOT APPLY TO: 1 any guarantee given or any security provided by a private company, unless it is a subsidiary of a public 2 to any guarantee given or any security provided by a holding company in respect of loan made to its w

FAQs

In case Corporate Guarantee is taken as a contractual comfort, then is it necessary that the certificate from the statutory auditors be obtained certifying that the company is within the limits of Sec 372A and all the provisions of Sec 295 and 372A have been 1 complied.

In case a Corporate Guarantee is taken as a contractual comfort, can the same individual( s) be authorized to negotiate and execute the documents on behalf of 2 borrower and guarantor

FAQs 1 In case Corporate Guarantee is taken as a contractual comfort, then is it necessary that the certificate

YES 2 In case a Corporate Guarantee is taken as a contractual comfort, can the same individual( s) be authorized to negotiate and execute the documents on behalf of borrower and guarantor

body corporate or any loan made by body corporate to any person

on 372A and 295 of companies act 1956

t is a subsidiary of a public company pect of loan made to its wholly owned subsidiary

YES The person negotiating and executing the documents for borrower company and guarantor company must be different in order to avoid conflict of interest. POIN TO BE ADDED FROM CHECKLIST

essary that the certificate from the statutory auditors be obtained certifying that the company is within the limits of Sec 372A and all the

In case a Corporate Guarantee is taken as a c

the limits of Sec 372A and all the provisions of Sec 295 and 372A have been complied.

orporate Guarantee is taken as a contractual comfort, can the same individual( s) be authorized to negotiate and execute the documents

tiate and execute the documents on behalf of borrower and guarantor