. Which Guidelines govern the same and what would be the statutory formalities for the same???
Notification No.FEMA 8/2000-RB dated 3rd May 2000 . The notification provides the following prohibition:
Prohibition :-
Save as otherwise provided in these regulations, or with the general or special permission of the Reserve Bank, no person resident in India shall give a guarantee or surety in respect of, or undertake a transaction, by whatever name called, which has the effect of guaranteeing, a debt, obligation or other liability owed by a person resident in India to, or incurred by, a person resident outside India.
RBI master circular on WOS / JV abroad dated July 1, 2010.. In terms of the circular guarantee can ben given on behalf of a subsidiary / JV in which Company 'A' has equity participation. Going by this, Company A can't give guarantee on behalf of Company 'C'
Hence , Guarantee can be offered by a Indian Company to a foreign company in a structured business transactions only. The prohibition clause says even with the general or special permission from RBI , Guarantee cannot be given unless there is a structured business transaction.
