Dear Experts,
A Private Limited Company (XYZ Pvt. Ltd.) having paid up share capital of Rs.300 lacs and Reserve & Surplus of Rs.75 Lacs is willing to give guarantee of Rs.200 lacs to the Bankers of Sole Proprietary Firm of one of the promoter director (Mr. X) holding 100% shareholding in the company jointly with his wife (Mrs. X), another director in the company. XYZ Pvt. Ltd. is having only 2 shareholders, who are also directors in the company. The company in question is neither a subsidiary nor holding company of any other private or public limited company.
XYZ Pvt. Ltd. does not own any immovable property but having fixed deposits in company’s name with the same bank to the tune of Rs.200 lacs, which are now proposed to be pledged with the bank for OD Limits sanctioned to the Sole Proprietary Firm of the promoter director Mr. X. As far as I understand, Section 295 of the Companies Act, 1956 is not applicable to XYZ Pvt. Ltd., since the company is not a subsidiary of any public limited company. In my opinion, there is no restriction under Companies Act, 1956 for this type of guarantee.
Please advise what procedure is to be followed for giving of Guarantee as stated above and what resolutions are to be passed in Board meeting and / or Shareholders meeting?
Thanks in advance,
CAclubindia
