The Chief Executives,

All Banks.

Dear Sirs/ Madam,

PERSONAL GUARANTEE OF PRIVATE LIMITED COMPANY

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:

• 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.
• 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:

- Lien on foreign currency deposits held with the lending banks,

- 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.