A bank guarantee is an instrument of guarantee by a bank, wherein bank undertakes obligation(s) on behalf of a party, that in the event the party fails to honor its committed obligation, bank will be fulfilling such obligation.
A bank guarantee is generally by one party to another in case of commercial contracts between them. The concept of bank guarantee is slowly diminishing and it is mostly now used in transactions with Govt. bodies.
The following is a template of board resolution with regard to bank guarantee. The same can be used with any changes as may be required.
Sample/Specimen/Draft Board Resolution for Bank Guarantee
“RESOLVED THAT the consent of the Board of Directors be and is hereby accorded for availing Bank Guarantee of Rs. ______/- (Rupees ________ only) for _______ purpose from any of the bankers of Company.
RESOLVED FURTHER THAT Mr. Y Not, Director and Mr. B Nuts, GM Finance be and is hereby authorized to make, sign and execute, on behalf of the Company, such deeds, agreements, undertakings and all other documents or papers as may be necessary including documents for creation of security, if any, to accept modifications to the same as may be required
RESOLVED FURTHER THAT Mr. Y Not, Director and Mr. B Nuts, GM Finance be and is hereby authorized to do all such acts, deeds and things that may be required or considered necessary or incidental for availing of the said Bank guarantee and for creation of security in favour of the Bank.
FURTHER RESOLVED THAT a copy of this resolution duly certified by any of the Directors of the Company be forwarded to the banker.”