Corporate guarantee by holding company to subsidiary company which is also a related party

[Indrani Sanka]

Dear All,

Can any one pl let me know if an Indian holding company is permitted to provide corporate guarantee to its Indian subsidiary company towards bank loan borrowed by the subsidiary company.

Note:

a. the companies have common directors and shareholders.

b. it is not a 100% subsidiary company

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Regards,

Indrani

[sid]

Ye it can and giving of guarantee does not fall under  section 188, but the loan taken by subsidiary should be utilized towards its principal business activities, refer rule 10 of Meeting of board and its powers rules.

[Indrani Sanka]

Hi,

Is int sec 185 applicable?

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Regards,

Indrani

[Vivek Hegde]

Dear Indrani,

I think it is not allowed as per the attached circular.

Warm Regards

CS Vivek Hegde,B.com, FCS, CWA

Vivek Hegde & Co.
Company Secretaries
No. 2034, 26th Cross, K.R.Road
Banashankari II Stage, Behind 

Sevakshetra Hospital

Bangalore-560070
Mob : 09900898223

Off: 080 26710667

[sid]

Dear Indrani,

Please refer the rules it specefically exempts giving guarantee for loan taken by subsidiary subject to its utilization for principal business activities. And this rule has been made under section 185 only.

On Tuesday, January 13, 2015 at 12:00:15 PM UTC+5:30, INDRANI SANKA wrote:

[sid]

Dear Indrani,

Please refer the rules it specefically exempts giving guarantee for loan taken by subsidiary subject to its utilization for principal business activities. And this rule has been made under section 185 only.

On Tuesday, January 13, 2015 at 12:00:15 PM UTC+5:30, INDRANI SANKA wrote:

[Vijayalakshmi Karur]

Dear Indrani,

Please refer Rule No.10(2) of  Companies(Meetings of board and its powers) Rules,2014, which exempts the guarantee and security by a holding company to its subsidiary 

CS Vijayalakshmi K

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[Indrani Sanka]

thank you all for your valuable suggestions. on reading rule 10 of Companies (Meetings of Board and its Powers) Rules, 2014 i have understood that there is a exemption provided for holding and subsidiary company if the loan borrowed or the guarantee provided is utilized by the subsidiary company for its principle business activities.

[Indrani Sanka]

thank you for the information...

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Regards,

Indrani