Re: [CSMysore] Query regarding corporate guarantee to related party

[Anu Pasrija]

Read section 185 along with section 186 and 5th June notification for better clarification 

On Mon, Feb 29, 2016 at 2:14 PM, Jatin Chadha <csjati...@gmail.com> wrote:

XYZ Private Limited has two directors A and B.

A and B are partners in M/s XYZ, a partnership firm.

XYZ Private Limited gave a corporate guarantee for bank loan availed by M/s XYZ, before implementation of Section 185 of Companies Act, 2013.

Now given that: Section 185 does not allow such transaction; banker is not revoking the guarantee; directors are not ready to change constitution of firm or to increase capital of the company to claim exemption to private company, is it feasible to continue such guarantee if:-

1. The company alters its objects clause by adding an object that it may give guarantee to other parties including related parties, in consideration of a fixed percentage as guarantee commission.

2. Will it constitute the ordinary course of business, so as to be exempted from Section 185 ?

3. Is there any case law or clarification in this regard ?

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Charms

Company Secretary in Practice

Anu Pasrija

+91-8269453819

Gwalior

[ACS suresh chaudhary]

The company has to do nothing.The guarantee was given when companies act 1956 was in force. the act committed under the old act.The guarantee will continue till full repayment of loan.The Bank is Right in not revoking the guarantee you cant compel the bank to revoke the same and the guarantee will continue.The new act bars the fresh guarantee given by the company to any body corporate or any person in which director is interested.Do not think that its a continuing guarantee it was given one time when the new act was not implemented.

Secondly, the act overrides the MOA any changes in it will be of no effect/use at all.

Thirdly, How it could be an ordinary course of business? what business does your company engaged in?

[Indrani Sanka]

Hi. I Don't think there is any restriction in giving guarantee under the new law. Check the internet corporate loans and guarantees given. If it is in excess obtain           a special resolution.

On 29-Feb-2016 2:15 pm, "Jatin Chadha" <csjati...@gmail.com> wrote:

XYZ Private Limited has two directors A and B.

A and B are partners in M/s XYZ, a partnership firm.

XYZ Private Limited gave a corporate guarantee for bank loan availed by M/s XYZ, before implementation of Section 185 of Companies Act, 2013.

Now given that: Section 185 does not allow such transaction; banker is not revoking the guarantee; directors are not ready to change constitution of firm or to increase capital of the company to claim exemption to private company, is it feasible to continue such guarantee if:-

1. The company alters its objects clause by adding an object that it may give guarantee to other parties including related parties, in consideration of a fixed percentage as guarantee commission.

2. Will it constitute the ordinary course of business, so as to be exempted from Section 185 ?

3. Is there any case law or clarification in this regard ?

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[CS Rohit Kumar]

section 185 is not applicable to private company

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CS Rohit Kumar

Mobile No. 9555156805
                8527046791

[ACS suresh chaudhary]

section 185 not applicable if conditions satisfied as per notification dated 05.06.2015

[Indrani Sanka]

Hi,

Section 185 shall not be applicable to pvt. companies:


(a) which have borrowings from banks or financial institutions or any bodies corporate not more than twice of their paid up share capital or Rs. 50 crore, whichever is lower; and
(b) in whose share capital no other body corporate has invested any money”.

Regards,

Indrani