Conversion of Loan from NRI

[Vighneshwar Bhat]

Dear All,

 

A company received Loan from NRI in the year 2007.

Now Company wish to convert it in to equity.

FEMA (Borrowing and Lending in Rupees) Regulation, silent about this subject.

 

Is there any other provisons which approves the conversion of loan to equity.

 

Thanks in Advance.

--
Vighnesh
Company Secretary

[R V SECKAR]

Hello,

 

Companies Act does not prohibit such transactions.

1.As per FEMA- Permissible Capital Account Transactions, Regulations 2000, a resident company can raise loans from a non-resident, provided that the company is not engaged in activities mentioned under Regulation 4 (b).

 

From the question, I understand that you have received the loan in INR. I think , you have undertaken all RBI formaliites while accepting loan from NRI.

 

An Indian company can issue shares to an NRI under non-repatriation scheme and in such cases , no reporting to RBI is needed.

 

Regards

 

R.V.Seckar

Pl do visit my blogs :

http://www.rvseckarcompanylaw.blogspot.com/

http://rvseckarfema.blogspot.com/

http://rvseckarindianlaws.blogspot.com

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[badrinath chavan]

whether your borrowing comes under ECB ?

if yes , then i will provide the answer

[Vighneshwar Bhat]

Sir,

 

No.

Vighnesh
Company Secretary

[ishan jain]

Hello,

 

I also stand with Seckar Sir, that as per companies act you have to follow normal procedures for allotment of shares but you have to keep this thing in mind that whether the loan taken is repayable in cash or not because it affects the allotment made in cash or in consideration other than cash.

 

matter related to FEMA Seckar Sir is correct.

On Mon, Sep 26, 2011 at 11:19 AM, R V SECKAR <rvsek...@gmail.com> wrote:

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Thanks and Regards

ISHAN JAIN

[ankit vageriya]

Dear Friends , 

in addition to the question i want to ask that what happened if there is a indian listed company inspite of any foreign companywhose loan are converted into Equity .

thanking you 

ankit vageriya

company secretary