Book Debts and whether they be converted to equity

[Bhawna Agiwal]

Dear Members,

What would be included in book debts? 

Will it include only the sum of money that is due to business in the ordinary course of business or does it also include any other sums or amount due to be received and whether book debts can be converted into equity?

Thanks and regards

Bhawna Agiwal

[Nuren Lodaya]

It Includes your Debtors

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[Vineet Maheshwari]

Hello,

Not able to understand how shares can be issued to book debts of the company. You can issue shares to your creditors or any assets provider or any service provider (expenses of the company), in all cases you are required to pay the cash (or thr bank) and in lieu you issued shares to extinguish your liabilities. Now in case of Book debts, the company is required to receive the cash only.

    

On Sat, 10 Jun 2023 at 04:39, Ashutosh Shukla <imaash...@gmail.com> wrote:

Hi,

Concerning the first question, the term "book debt" often represents the outstanding amounts due to a company from its debtors, which primarily consists of accounts receivable resulting from credit sales or unpaid invoices from customers. It often forms part of the asset side of a company's balance sheet in the form of current assets. Please note that it is different from the "Book Value of Debt," which refers to the value of a company's debt obligations as recorded in a company's financial statements. 

Now, coming to the second question and assuming that you are referring to the book debt, I don't see any restriction in its conversion into equity. However, there are several important considerations, that I would like to point out. You need to determine, whether your debtor is a company or companies that owe you a significant debt making it feasible enough to opt for the Section 230 route and whether such a company is eligible to issue shares. Considering that the book debt may also arise on account of credit sales made to individual customers, the option of debt restructuring becomes infructuous. 

Other learned members may also share their opinion in this regard. 

Thanks and Regards,

CS Ashutosh Shukla

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[Ashutosh Shukla]

Hi Vineet Ji,

I think I have made a grave mistake in the second paragraph of my post. I stand completely disarmed and I have no excuse whatsoever. Thanks for pointing that out. Initially, I thought that the main reason for the concern was the 3rd line of the second paragraph, which I should have phrased in a better way to make it clear that the questioner shall be a creditor and accordingly the debtor company would be able to issue shares to the questioner's company extinguish its liabilities. I already had some reservations but the concept of shares for consideration other than cash did not click and I ended up taking a wrong turn. I shall delete that post. 

Much Regards,

CS Ashutosh Shukla

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[Bhawna Agiwal]

Sir,

For conversion of loan into equity

MGT-14 will be filed only after obtaining shareholders approval right?

or 

Does we need to file 2 MGT-14,  one at the  time of board approval and second after passing SR  or only one MGT-14 would suffice

Needed a clarification

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