A (P) Ltd. has invested in 100 % equity of B (P) Ltd. Management of both the Companies are same.
Holding Company has to furnish a corporate guarantee to the bankers of its subsidiary.
How to go about it?
Rule 11. Loan and investment by a company under section 186 of the Act.
Where a loan or guarantee is given or where a security has been provided by a company to its wholly owned subsidiary company or a joint venture company, or acquisition is made by a holding company, by way of subscripttion, purchase or otherwise of, the securities of its wholly owned subsidiary company, the requirement of sub- section (3) of section 186 shall not apply: Provided that the company shall disclose the details of such loans or guarantee or security or acquisition in the financial statement as provided under sub-section (4) of section 186.
In view of the above, you can pass a board resolution to give a guarantee to WOS and the details of the which shall be stated in Financial Statements.
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