|
Clarification regarding Corporate Guarantee
Circular No.
38 dated 9th September 1997
Kindly refer to
Board's letter F.No. 605/ 75 (A)/ 95-DBK dated 8th August 1997 regarding revised
Norms for execution of Bond and Bank Guarantee under DEEC Scheme.
2.
Representations have been received from Customs houses and from the
exporting community regarding the scope of some of the terms used in the
Circular viz. "Flagship Company" and Group Companies. Doubts have been
raised whether the term "Flagship Company" is based on a legal
definition and in the absence of a definition how is Flagship Company to be
identified. Secondly, on what basis is a Company to be treated as a Group
Company? These doubts and a few others are being classified herewith.
3.
The term "Flagship Company" is not legal term and is not
defined in any statute. Its usage is in vogue to refer to the leading Company in
the Group/ under the same management. It has accordingly been decided to drop
the term "Flagship" from the Circular dated 8.8.1997.
4.
The benefit of the exemption from furnishing a Bank Guarantee may be
allowed to any Group Company which gives a Corporate Guarantee executed by
another Company of the same group, which is a recognised status holder under
EXIM Policy (1997-2002) i.e. the executing Company must be a Super Star Trading
House, Trading House etc.
5.
For the purpose of identifying that both Companies are Group Companies,
i.e. the Company furnishing the Corporate Guarantee (CG) and Company on whose
behalf the CG is executed the following may be satisfied.
6.
First of all a Group Company must be one which is under the same
management, i.e. in which any of the following ingredients is satisfied:
(i)
both the companies have the same person as Managing Director or Manager;
(ii) a majority of the Directors of one Company
also form at any time preceding the six months the majority in the other;
(iii) not less than one-third of the voting power on any
matter in the two companies is controlled by the same individual or bodycorporate; and
(iv) one or more
Directors of one company with or without their relatives hold the majority of
the shares in both the companies.
7.
Secondly the Company must maintain a Register as required under Company
Law which indicates the names of body Corporate or Companies which are under the
same management. The Company executing the Corporate Guarantee must give to the
Commissioner of Customs a certified copy of the said Register signed by an
authorised Company Secretary/ Chartered Accountant that the Company in whose
favour CG is given is a Group Company. The Certificate should also indicate the
relevant criterion by which they come under the same management/ Group.
8.
The Company executing the CG must give the Guarantee only after the
Company's Board passes a Resolution under Section 370 of the Companies Act. A
copy of the Resolution signed by authorised Company Secretary must be obtained
from the aforesaid Company.
9. The Company must also obtain a 'No Objection
Certificate' from their term-lending Financial Institution/ their Bankers for
giving a CG.
10. The Corporate Guarantee must be valid for two years
at a time and should be renewed subject to the aforesaid conditions before the
expiry of two years.
11. In the event of failure to renew the Corporate
Guarantee before expiry of two years, the Guarantee must have a provision for
enforcing the same to recover Customs duties which would be leviable but for
exemption from duty.
12. The changes, if any, in the management of both
Companies must be effected only after informing Commissioner of Customs so that
the validity of existing CG can be examined, and if necessary, a fresh CG be
obtained.
13. The Corporate Guarantee may be accepted as a
substitute for a Bank Guarantee even in respect of Capital Goods cleared in the
past against a EPCG Licence subject to all the above-mentioned conditions being
completed to the satisfaction of the commissioner of Customs.
14. Where in any particular case, Committee of
Secretaries prescribes a BG to be furnished by a EPGE Licence Holder instead of
a Corporate Guarantee, Custom House shall not accept Corporate Guarantee unless
COS permits the Licence holder to give a Corporate Guarantee.
15. A company, which is eligible for executing a
Corporate Guarantee in favour of a Group Company, may be permitted to execute a
Corporate Guarantee on its own behalf also. As such the Company even though it
is an Export House, may give a Corporate Guarantee in place of a Bank Guarantee.
|