corporate guarantee by group pvt company to group public company
Q: In context of Section 185 & 186 of Companies Act 2013, if any group private limited company gives/provides corporate guarantee and equitable mortgage of its property in favour of its group public limited company, is it possible to give the same. What if both the companies are private limited companies?
Answer: As per the provisions of section 185 no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person.
However any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company is exempted from the requirements under this section; and any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company is exempted from the requirements under this section.