Write short notes on the following: Corporate Guarantee by a Company to another Company

Section 186(2) of the Companies Act, 2013 provides that, no company shall directly or indirectly give any guarantee or provide security in connection with a loan to any other body corporate or person exceeding 60% per cent. of its paid-up share capital, free reserves and securities premium account or 100% of its free reserves and securities premium account, whichever is more. Where the aggregate of the amount for which guarantee or security so far provided to or in all other bodies corporate along with guarantee or security proposed to be made or given by the Board, exceed the limits specified above, no guarantee or security shall be provided unless previously authorised by a special resolution passed in a general meeting. However, where the inter-corporate guarantee is given or where a security has been provided by a company to its wholly owned subsidiary company or a joint venture company, the requirement of Section 186(2) of the Companies Act, 2013 shall not apply. The company shall disclose to the members in the financial statement the full particulars of the guarantee given or security provided and the purpose for which the guarantee or security is proposed to be utilised by the recipient of the guarantee or security. No guarantee or security can be given by the company unless the resolution sanctioning it is passed at a meeting of the Board with the consent of all the directors present at the meeting and the prior approval of the public financial institution concerned is obtained, where any term loan is subsisting.