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Resolution for inter corporate guarntee

Kalpana Gupta (Company Secretary) (66 Points)

06 May 2010

Hi,

Can somebody provide me with a resolution for inter corporate guarntee to be provided by a private company to a public company

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5 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 06 May 2010

Modify the resolution as per your need:

RESOLVED THAT pursuant to the provisions of section 372A of the Companies Act, 1956 and other applicable provisions, if any of the Companies Act, 1956 (including any statutory modification or re-enactment thereof for the time being in force) and in accordance with the provisions of Articles of Association of the Company and subject to further approval of statutory and other authorities as may be necessary and subject to such terms, conditions, stipulations, alterations, and modifications, if any, as may be prescribed and specified by such authorities while granting such approvals and which may be agreed by the Board of directors of the Company (hereinafter referred to as the `Board' which expression shall include a Committee of directors duly authorised in this behalf) the consent of the Company be and is hereby accorded to the Board of directors of the Company to make investments and to provide loan, give securities, guarantee in excess of the 60 % of the aggregate of the paid-up share capital and free reserves and/or upto 100% of the aggregate of free reserves of the Company as per the limits prescribed under section 372A in the following bodies corporate as they may in their absolute discretion deem beneficial and in the interest of the Company subject to the maximum aggregate amount not exceeding Rs. 100 Lacs at any time together with the existing loan and investments.

RESOLVED FURTHER THAT the Board of directors of the Company be and is hereby authorised to negotiate the terms, condition, quantum of loan, repayment, interest and other related matters for providing any loan, guarantee and securities to the above said bodies corporate and to do all such deeds and things as may be deemed expedient and necessary to give effect to this resolution.

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Munish Bhandari (MD) (163 Points)
Replied 22 August 2010

Dear Mr. Ankur Garg,

In my view, u have made some mistakes in drafting the resolution, as specified below:

1. The corporate guarantee in the given case is to be given by a private company. The provisions of section 372A are not applicable to a private company. Therefore, reference to section 372A in the resolution is not at all required.

2. You have given reference to some limits in the resolution, as specified below:

“60 % of the aggregate of the paid-up share capital and free reserves and/or upto 100% of the aggregate of free reserves”

Since Section 372A does not apply in the given case, the reference to these limits given u/s 372A is not acceptable.

3. The words “… the consent of the Company be and is hereby accorded to the Board of directors…” imply that u have drafted the general meeting resolution authorizing the Board to provide the guarantee.

In case of a private company, the power to provide guarantee is always vested with the Board. No authorization by the members is required in any case. So, the resolution to be given in the answer should have been a Board resolution and not general meeting resolution.

Regards,

Munish Bhandari

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