---------- Forwarded message ----------
From: BIPIN ACHARYA <bipinsacharya@gmail.com>
Date: Sun, Jul 25, 2010 at 5:11 AM
Subject: Re: [CharteredSecretaries] RE: [CS_yahoogroups) Section 295 & 372A (urgent)
To: CharteredSecretaries@yahoogroups.co.in
From: BIPIN ACHARYA <bipinsacharya@gmail.com>
Date: Sun, Jul 25, 2010 at 5:11 AM
Subject: Re: [CharteredSecretaries] RE: [CS_yahoogroups) Section 295 & 372A (urgent)
To: CharteredSecretaries@yahoogroups.co.in
Dear friends,
1/ Nice poser, stimulates thinking.
2/ The transaction under reference is the giving of guarantee by a private company which is
subsidiary of a public company.
3/ By implication of the provisions under section 3[1][iv][c], is it not a public company?
If yes, do the provisions under section 372A not apply?
The exemption given to a private company under section 372A[8][a][iii] is given to a
private company " unless it is subsidiary of a public company ". implying that the
exemption is given to a private company and if the private company giving guarantee
is a subsidiary of a public company, the exemption is withdrawn and the restrictive
provisions under section 372A are required to be complied with.
4/ The directors are common in both the companies and one of them holds 65% shares
in the holding company and 10% shares in the subsidiary company.
As to the application of the provisions under section 295, the exemption under sub-
-section 2[a][i] is not available to B Private Limited [ the lending company, giving
guarantee ] since the lending company is a subsidiary of a public company.
Despite the directors being common in both the companies being common, B Private
Limited [ the lending company ] while giving guarantee in connection with a loan
made by any other person to its holding company [ and not to any director of the
holding company or to any director of itself ], will not have to comply the restrictive
provisions under section 295.
The holding company , though being a public company will not have to comply the
restrictive provisions under section 295 because of it is not the lending company,
giving guarantee.
5/ Giving guarantee, as in the case under reference, is not considered as entering into a
contract for the supply of services covered under section 297.
As to the applicability of sections 299, 300 , it would be interesting to note
that both the companies have common directors , one of whom has shareholding in both
the companies [ 65% and 10 % ], that director is directly or indirectly interested in
ensuring that the subsidiary gives the guarantee for the loan given to the holding
company in which he has 65% shareholding [ which would be considered as his
personal interest and the same give would give rise to conflict with his duty thereby
attracting the requirements under sections 299 and 300 as well as 301.
The above constitutes my immediate reaction , open to correction as always,please.
charms,
bipin
1/ Nice poser, stimulates thinking.
2/ The transaction under reference is the giving of guarantee by a private company which is
subsidiary of a public company.
3/ By implication of the provisions under section 3[1][iv][c], is it not a public company?
If yes, do the provisions under section 372A not apply?
The exemption given to a private company under section 372A[8][a][iii] is given to a
private company " unless it is subsidiary of a public company ". implying that the
exemption is given to a private company and if the private company giving guarantee
is a subsidiary of a public company, the exemption is withdrawn and the restrictive
provisions under section 372A are required to be complied with.
4/ The directors are common in both the companies and one of them holds 65% shares
in the holding company and 10% shares in the subsidiary company.
As to the application of the provisions under section 295, the exemption under sub-
-section 2[a][i] is not available to B Private Limited [ the lending company, giving
guarantee ] since the lending company is a subsidiary of a public company.
Despite the directors being common in both the companies being common, B Private
Limited [ the lending company ] while giving guarantee in connection with a loan
made by any other person to its holding company [ and not to any director of the
holding company or to any director of itself ], will not have to comply the restrictive
provisions under section 295.
The holding company , though being a public company will not have to comply the
restrictive provisions under section 295 because of it is not the lending company,
giving guarantee.
5/ Giving guarantee, as in the case under reference, is not considered as entering into a
contract for the supply of services covered under section 297.
As to the applicability of sections 299, 300 , it would be interesting to note
that both the companies have common directors , one of whom has shareholding in both
the companies [ 65% and 10 % ], that director is directly or indirectly interested in
ensuring that the subsidiary gives the guarantee for the loan given to the holding
company in which he has 65% shareholding [ which would be considered as his
personal interest and the same give would give rise to conflict with his duty thereby
attracting the requirements under sections 299 and 300 as well as 301.
The above constitutes my immediate reaction , open to correction as always,please.
charms,
bipin
On Sat, Jul 24, 2010 at 7:07 PM, Rajiv Ranjan - Legal <rranjan@kazstroyindia.com> wrote:
Sections 295 & 372A are not applicable on private companies.No compliance under these scetions need to be done by public co., being the recipent.Discloure of interest u/s 299 by directors in both the companies, compliance u/s 300 for public co. and entry in 301 register in both the companies need to be done.Will the transaction of providing corporate guarantee by private limited on behalf of public co. for the loan facility availed by the public co., can be termed as supply/sale of services u/s 297??? I think the interpretation of it being a service transaction u/s 297, would be too wide. Memebers may please give their views.RegardsRajiv Ranjan
From: company_secretary@yahoogroups.com [company_secretary@yahoogroups .com] On Behalf Of CS ROHIT [nikku_332@yahoo.co.in]
Sent: Saturday, July 24, 2010 11:27 AM
To: company_secretary@yahoogroups.com
Subject: [CS_yahoogroups) Section 295 & 372A (urgent)
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