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Section 295 and 372A of the Companies Act 1956 (Business Law)

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Author : Rohan Khandekar, MBA,CCA

Posted On 06 July 2011 at 09:55

Dear Professionals

Sec 295 of the Companies Act 1956 does not allow Public Limited Company to give any guarantee to any person , but my question is that our CS says that there is a specific section which states that a Public Limited Company can be a guarantor if the loan is certain % of company's paid up capital.

Sec 372A says that Intercorporate guarantees are permitted under this section, but please clarify Can a Public Limited Company give a guarantee to loans availed by its employees from a Cooperative Bank, if yes under what section of the Companies Act and what are the conditions to be satisfied.

Waiting for reply as our employees have taken Loan/OD facility from a cooperative and the Company is willing to be a Guarantor for the same.

Thanks



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