Circulars/Notifications - Banking Policy Department  
 BPD Circular Letter No. 19
July 20, 2002  

Presidents / Chief Executives
All Banks / DFIs
Dear Sirs / Madam,

 

PERSONAL GUARANTEE OF THE DIRECTORS OF PRIVATE LIMITED COMPANIES

 

Please refer to the instructions contained in BSD Circular Letter No. 21 dated the 23rd August 2001, regarding the submission of personal guarantee of the Directors of private limited company. In this regard, following clarifications are issued for guidance of the banks on the subject.

         i)      Corporate Guarantee issued by a private foreign holding company, which has been rated ‘A’ by a reputable International Credit Rating Agency, may be accepted by banks in lieu of a bank guarantee, keeping in view the international best practices. The rating report should be kept on file by the bank for future review of State Bank Inspectors.

       ii)      A director of a company who is not related to sponsors /owners of a company, having a post graduate education in business / commerce / accountancy / law / finance / management or in any subject related to his job, alongwith a minimum related experience of five years, may be considered as a professional for the purpose of BSD Circular Letter No. 21 of 23rd August, 2001.

     iii)      A nominee director, being nominated by a creditor bank on the board of a private limited company, shall be exempted from the requirement of submission of personal guarantee.

     iv)      In cases, where the personal guarantees from the directors representing majority interest in a private limited company are backed by assets  that are held in the name of these directors or in the name of their spouses are sufficient, severally, to cover the amount of financing given by a bank, the requirement of obtaining personal guarantees from the directors representing minority shareholding in that company may be dispensed with and need not be insisted upon. Evidence about the assets of the directors and /or their spouses will need to be obtained by the bank, in the form of a Personal Wealth Statement filed by such directors and / or their spouses, which shall be properly placed in the record of the bank for future review by SBP inspectors.   

2.   Please acknowledge receipt



Yours faithfully,
(Muhammad Kamran Shehzad)
Director

BPD Circulars/ Circular Letters issued in 2003
       
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