2.    Representations have been received from Customs houses and from the exporting community regarding the scope of some of the terms used in the Circular viz. "Flagship Company" and Group Companies. Doubts have been raised whether the term "Flagship Company" is based on a legal definition and in the absence of a definition how is Flagship Company to be identified. Secendly, on what basis is a Company to be treated as a Group Company. These doubts and a few others, are being classified herewith.

3.    The term "Flagship Company" is not legal term and is not defined in any statute. Its usage is in vogue to refer to the leading Company in the Group/ under the same management. It has accordingly been decided to drop the term "Flagship" from the Circular dated 8.8.1997.

4.    The benefit of the exemption from furnishing a Bank Guarantee may be allowed to any Group Company which gives a Corporate Guarantee executed by another Company of the same group, which is a recognised status holder under EXIM Policy (1997-2002) i.e. the executing Company must be a Super Star Trading House, Trading House etc.

5.    For the purpose of identifying that both Companies are Group Companies, i.e. the Company furnishing the Corporate Guarantee (CG) and Company on whose behalf the CG is executed the following may be satisfied.

6.    First of all a Group Company must be one which is under the same management, i.e. in which any of the following ingredients is satisfied :-

(i)    both the companies have the same person as Managing Director or Manager;

(ii)    a majority of the Directors of one Company also form at any time preceding the six months the majority in the other;

(iii)    not less than one-third of the voting power on any matter in the two companies is controlled by the same individual or body corporate; and

(iv)    one or more Directors of one company with or without their relatives hold the majority of the shares in both the companies.

8.    The Company executing the CG must give the Guarantee only after the Company's Board passes a Resolution under Section 370 of the Companies Act. A copy of the Resolution signed by authorised Company Secretary must be obtained from the aforesaid Company.

9.    The Company must also obtain a 'No Objection Certificate' from their term-lending Financial Institution/ their Bankers for giving a CG.

10.    The Corporate Guarantee must be valid for two years at a time and should be renewed subject to the aforesaid conditions before the expiry of two years.

11.    In the event of failure to renew the Corporate Guarantee before expiry of two years, the Guarantee must have a provision for enforcing the same to recover Customs duties which would be leviable but for exemption from duty.

12.    The changes, if any, in the management of both Companies must be effected only after informing Commissioner of Customs so that the validity of existing CG can be examined, and if necessary, a fresh CG be obtained.

13.    The Corporate Guarantee may be accepted as a substitute for a Bank Guarantee even in respect of Capital Goods cleared in the past against a EPCG Licence subject to all the above-mentioned conditions being completed to the satisfaction of the commissioner of Customs.

14.    Where in any particular case, Committee of Secretaries prescribes a BG to be furnished by a EPGE Licence Holder instead of a Corporate Guarantee, Custom House shall not accept Corporate Guarantee unless COS permits the Licence holder to give a Corporate Guarantee.

15.    A company which is eligible for executing a Corporate Guarantee in favour of a Group Company, may be permitted to execute a Corporate Guarantee on its own behalf also. As such the Company even though it is an Export House, may give a Corporate Guarantee in place of a Bank Guarantee.