BSD
Circular Letter No. 21 |
August 23, 2001 |
The Chief
Executives,
All Banks.
Dear
Sirs/ Madam,
PERSONAL
GUARANTEE OF PRIVATE LIMITED COMPANY
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In terms of
instructions contained in clause D of BSD Circular No. 7 dated
31st May 1972 no banking company shall, make advances
to a private limited company without obtaining personal guarantee
of the directors of such company, in addition to the normal
security which the banking company may require.
This is subject to the following relaxations as notified
from time to time:
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In cases
of foreign controlled private companies whose directors
in Pakistan are merely paid directors, either the personal
guarantee of directors in Pakistan or bank guarantee from
the holding company abroad may be obtained.
-
In case
of nominee director representing a Government entity,
the banks may waive the requirement of obtaining his personal
guarantee where Government guarantee is available.
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Advances
made to private limited companies including foreign controlled
companies resident in Pakistan are also exempt from the
requirement of obtaining personal guarantees of the directors,
where the advances are fully secured by way of:
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Lien on foreign currency deposits held with the lending
banks,
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Lien on foreign currency deposits when the foreign
currency deposits are replaced with Special US Dollar
Bonds registered in the name of the borrower issued by
converting US Dollar deposits.
-
Lien on Rupee deposits held with the lending banks,
in which case the requirement of obtaining personal guarantee
of directors of the company may be waived by the banks
at their own discretion.
It has now
been decided that the requirement of obtaining the Directors’
personal guarantees will not be applicable in the following
cases as well:
-
Advances
fully secured at all times against approved securities
such as Treasury Bills and Federal/Pakistan Investment
Bonds;
-
Directors
who are full time paid employees of the company and
the position of director is held by them owing to their
professional and technical capabilities; and
-
Directors
who are nominees of corporate entity/financial institution
and a guarantee has been given by the corporate entity/financial
institution nominating such person as a director.
Other instructions
on the subject shall, however, remain unchanged.
Please acknowledge receipt.
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Yours
faithfully,
(Kazi Abdul Muktadir)
Director |
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