CA NP Mathi Lingan (Practising Chartered Accountant) (98 Points)
30 June 2008A company borrows from a financial institution and the promoter director gives guarantee to the financial institution for the borrowings made by the company. Whether the payment of Guarantee Commission to the promoter director by the company violates the provision of Sec 314?
S.Srinivasaraghavan
(Chief Financial Officer and Co)
(11318 Points)
Replied 01 July 2008
This will come within the deeming provisions under section 314(3).
Rekha Sharma
(Company Secretary)
(167 Points)
Replied 01 July 2008
Yes section 314 is applicable .Pls go through Section 314(3) (a).you can find answer to this question.
Regards
Rekha Sharma
CA NP Mathi Lingan
(Practising Chartered Accountant)
(98 Points)
Replied 01 July 2008
Is it given anywhere in Ramaiah that guarantee commission paid to promotor director is exempted from Sec 314?
Rekha Sharma
(Company Secretary)
(167 Points)
Replied 01 July 2008
No i have not find such exemption so far anywhere except in M.C.Bhandari. where it is mentioned that section will not apply for guarntee commission or interest on loan paid to directors of the company .
however it is clear from Sec.314 (3) that if a director receives anything over and above the sitting fees /remuneration to which he is entitled as director section will apply. In this case mentioned by you i think section will not apply . You can check my opinion from other expert also.
Regards
Rekha sharma
CAclubindia
