Comfort Letter for Support from Parent to Subsidiary Co.

A letter of comfort can be issued by a holding/parent company in support of its subsidiary company, wherein the parent company assures its willingness to provide financial support to the subsidiary company in case any liability arises.

It is not like a bank guarantee wherein the liability of the guarantor is absolute and can be sued upon. It is just an affirmation to offer backup under certain circumstances.

Here are examples of such letters of comfort from parent companies for showing support for their subsidiary companies.

TEMPLATE #1

Date: _________

 

To

(Name of the Organization)

(Office Address)

Tel. _________

Reg.: Comfort Letter.

Dear Sir/Madam,

We hereby confirm that (Name of the Subsidiary Company), CIN: __________, having its registered office at ___________ ("the company") continues as a going concern for at least 12 months from the date of this Comfort Letter.

(Name of the Parent Company) is willing to provide financial support to (Name of the Subsidiary Company) in case of its financial difficulties and emergencies. Provided that the Board of Directors of the Company submit a detailed application with appropriate reasons on the need and utilisation of funds required.

We further confirm that (Name of the Parent Company) as the shareholder of (Name of the Subsidiary Company) will adopt a general meeting resolution on measures necessary for ensuring that the equity of (Name of the Subsidiary Company) will be in accordance with the Corporate Laws of the country.

For (Name of the Parent Company),

    (Signature)

Authorised Signatory

TEMPLATE #2

To

The Authorised Signatory,

(Name of the Authorised Dealer Category-I Bank)

(Bank's Address)

Dear Sir/Madam,

Sub.: Application for establishment of a branch/ liaison office in India by our subsidiary/ group company i.e. __________ Limited.

You may kindly refer to the application made by our subsidiary/ group company, _________ Limited to your office for establishing a branch / liaison office in India.

In this connection, we, __________ Limited (the parent company/group company) undertake to provide the necessary financial support for our subsidiary/ group company's operations as a branch/ liaison office in India. Any liability that may arise due to the functioning of the branch/ liaison office in India will be met by us (the parent company/ group company), in case of inability on part of the branch/liaison office to do so.

We are also enclosing the financial background of our company in the form of our latest Audited Balance Sheet / Account Statement certified by a Certified Public Accountant.

Yours faithfully,

    (Signature)

Authorised Representative

of ________ Limited

("Parent Company")

Date: _________

Place: _________