Shareholder Resolution for Guarantee for Step-down subsidiary

In accordance with the provisions of Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, all material related party transactions shall require approval of the shareholders through resolution.

A transaction with a related party shall be considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds 10% of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity.

SAMPLE

(Corporate Guarantee on behalf of Step-down subsidiary of the Company in favor of Bank)

(In case of Limited Company)

[Guarantee amount is within the limit prescribed under Section 186(2) of the Companies Act, 2013

#. To approve the Corporate Guarantee issued to ................... Limited

To consider and if thought fit, to pass with or without modification(s), the following resolution as an ORDINARY RESOLUTION:

“RESOLVED THAT pursuant to Regulation 23 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, and other applicable provisions, if any, the Corporate Guarantee issued by the Board of Directors of the company (hereinafter referred to as "the Board", which term shall include any Committee constituted by the Board or any person(s) authorised by the Board to exercise the powers conferred on the Board by this Resolution) for an amount of INR ................ (Rupees ...................... Only) in favour of .............. Bank Limited, on behalf of M/s. ................... Limited, step-down subsidiary of the company, be and is hereby confirmed and approved.”

EXPLANATORY STATEMENT PURSUANT TO SECTION 102(1) OF THE COMPANIES ACT, 2013

The following explanatory statement sets out all material facts relating to the special business mentioned in the accompanying notice dated ................. and shall be taken as forming part of the notice.

Item No. ...

.................... Limited, Step-down Subsidiary of the company is engaged in the business of .......................................

.................... Limited has availed Term Loan from ............. Bank Limited, .........Branch, ..(City).. of INR ............... for its business purposes. One of the terms and conditions of the sanction letter stipulates that the company shall provide the Corporate Guarantee for the above said facility.

In order to obtain expeditious dispersals from ............. Bank Limited, and to meet the funds requirement of the business opportunities in hand of the said step-down subsidiary company, your company issued Corporate Guarantee on behalf of .............. Limited for an amount of INR ............... in favour of ................... Bank Limited at its Board meeting held on ..(Date)...

In accordance with the provisions of Regulation 23 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 [SEBI (LODR)], defines term Material Related Party Transaction. It provides that all related party transactions shall be considered as "Material" if the transaction entered with or transactions to be entered individually or taken together with a Related Party along with previous transactions during a Financial Year exceeds 10% of the Annual Consolidated Turnover of the company as per the Last Audited Financial Statement of the company. The Material Related Party Transactions requires approval of the Shareholders by passing an Ordinary Resolution and in respect of voting on such resolution(s), all the related parties shall abstain from voting, irrespective of whether the entity or person is a party to the particular transaction or not, pursuant to Regulation 23(7) of SEBI (LODR).

Based on the criteria as mentioned above in the SEBI LODR, issue of Corporate Guarantee to .................. Bank Limited by the company on behalf of its step-down subsidiary M/s. ....................... Limited are “Material” and therefore requires approval of the Members of the company by an Ordinary Resolution. Accordingly, an Ordinary Resolution under Item No. ... for ratification/approval of the Corporate Guarantee issued for INR ................ in favour of .................... Bank Limited is placed before the Shareholder for ratification/approval.

None of the Directors and Key Managerial Personnel of the company and their relatives may be deemed to be interested/concerned in this resolution, except to their respective shareholdings in the company, if any.

The Board commends the said enabling resolution for the approval of the members.



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Relevant Resolution:

Special Resolution under Section 186 of Companies Act 2013 - available here
(To make investments, give loans, guarantees and security in excess of limits specified under section 186 of the Companies Act, 2013)

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NOTE: The resolution sample(s) here is only for reference, to help you with drafting. Do refer the exact provisions of the Act, relevant rules framed thereunder and any other applicable laws to be able to not to miss out anything important while drafting.