Fwd: CONVERSION OF LOAN INTO EQUITY - PLEASE PROVIDE YOU VALUABLE COMMENTS

[Shipra Mishra]

Dear Experts,

A company wants to convert its unsecured loan into equity taken from the

 1. individual who is neither shareholder nor director and 

2. a private limited company, 

The loan was received 2 year back and moreover we didnt pass any special resolution as we didnt intent to convert loan into equity at that point of time also the requirement was not there.

In respect to the above i want to ask certain questions

1. is section 62(3) covers unsecured loan or only secured loan and debentures?

if section 62(3) covers unsecured loan then what can we do as we have not passed special resolution earlier?

2. should we treat it as a preferential allotment?

if yes, how the company will follow the criteria of opening separate bank account (as the company do not have money)

3. can we do right issue under section 62(1)(a)(ii) and renounce the offer in favor of any other person as said above. (practically possible for us as the company is operated by the family)

and now  company want to convert the same  into equity 

Please share your opinion, as i haven't get any valid solution for this

Regards

For Shipra Mishra & Associates 
CS Shipra Mishra 

Partner 
N6/456, IRC Village,

Bhubaneswar – 751015, Odisha

Phone: 9437574885, 9810116090

Email: Shipraand...@gmail.com, shipr...@gmail.com

 

[Jaisal Mohatta]

Dear Shipra Ji,

It can be done by Private Placement only. 

Just hold the EGM pass the special resolution.

You have give private placement letter of offer to the existing shareholder.

Four forms need to filed GNL-2 for 2 times i.e. for Letter of Private Placement offer (PAS-4) and Records of private placement (PAS-5).

Along with this MGT-14 for SR and PAS-3 for return of allotment to be filed.

Don't forget to take NOC from Directors for such conversion and if you are alloting in premium then also attach valuation report.

Thanks

CS Jaisal Mohatta

Dear Experts,

Email: Shipraandassociates@gmail.com, shipramail2@gmail.com

 

[PL Babu]

Dear Jaisal Ji

is  there any wrong if we file single GNL-2 with 

Letter of Private Placement offer (PAS-4) and

Records of private placement (PAS-5)           

instead of GNL-2 for 2 times ???

please comment.

On Friday, July 3, 2015 at 6:42:17 PM UTC+5:30, Shipra Aggarwal wrote:

Dear Experts,

Email: Shipraandassociates@gmail.com, shipramail2@gmail.com

 

[neha agrawal]

Yes For PAS-4 and PAS-5 single GNL-2 will work..no need to file 2 forms

Regards,

Neha Agrawal

Dear Experts,

Email: Shipraand...@gmail.com, shipr...@gmail.com

 

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[Shipra Mishra]

​Dear members,

can we go for option no 3 ? instead of that long process ??

​

[Shweta Daga]

I think it cannot be done through private placement as no separate bank account is open for consideration. It can be done either on Prefrential basis or 62(3).

Thanxs & Regards

Shweta Daga

Mob 7838657554

[CS Manish Kushwaha]

Hi,

Acc. to me Private placement should have to be preferred, if allotment is other than existing shareholders.  

because SR should be passed before taking loan or issue debentures(approving the option containing in loan agreement)  is under new act . so if loan taken before 1.4.2014, than no SR required.

and section 62(3) says nothing in section-62 shall apply to increase in subscribed capital by way of conversion of loan into equity.

Hence, Right issue under section- 62(1)(a)

            ESOP scheme under section 62(1)(b)

            Preferential allotment under section-62(1)(c)

all issue under 62 are not applicable in conversion of loan into equity.

So, only way is there is a private placement.

Regards

Manish

 

[Shweta Daga]

Dear Learned Members,

Can u please clarify  why conversion of loan into equity is treated as consideration for cash?? 

Thanxs & Regards

Shweta Daga

Mob 7838657554

--

[Pankaj CS]

Friends, though I am replying too late but want to share my opinion. 

Can't we adopt procedure mentioned in 62(3) by 

- just altering the terms of acceptance of loan by 

- inserting the additional term of conversion into equity and 

- get the same pre-approved from shareholders from 

- current date. 

Kindly comment.

Dear Experts,

Email: Shipraandassociates@gmail.com, shipramail2@gmail.com