Personal guarantee by indian resident
Vashishth Joshi
(Querist) 03 September 2019
This query is : Resolved
BRIEF OF THE TRANSACTION
An Indian company is willing to enter into several trades with a company in Ghana. The partner/director of this Ghana company is an Indian resident. He assures to give the Indian company a certain amount of trade and a fixed percentage of return for the credit period he uses to pay the invoices. There is an understanding between this Ghana company and Indian company whereby, the Indian company would sell goods to Ghana company under credit terms (4-6 months). However, the Indian company needs some security of the payment. Hence, the partner of this Ghana company is ready to become a guarantor and give PDC (as security) issued in his personal capacity in favour of the Indian company. If the Ghana company defaults, the Indian company can encash the cheques of the Surety or sue him if it is dishonoured.
QUESTIONS:
1. Can this Indian person, being a partner in the Ghana Company, act as a Surety and give personal guarantee under the agreement?
2. Is Indian company entitled to receive PDC in INR as a security, for the given transaction (being in foreign currency) and be able to effectively use it to cover its debt, if the foreign company defaults in payment?
3. Considering the involvement of foreign currency bill being secured against Indian currency PDC, is there any requirement to report this agreement to RBI or need to follow any FEMA guidelines?
rajeev sharma
(Expert) 03 September 2019
To avoid all these hassles ask Ghana company to furnish bank guarantee
