Conversion of Loan into equity - whether rights issue or private placement.?

[Ganapati Ghatti]

Dear All, 

A Company intends to convert the unsecured loans received from one of its Director. There is one more Director in the Company. 

Both the Directors are the members of the company. There are no members other than the two Directors. 

Now, please let me know which procedure do we need to follow for the conversion purpose. Whether rights issue or private placement.?

Thank you in advance for your valuable guidance. 

Ganapati Ghatti

Mobile: +91-8970797164

[kavita goel]

Its shall be right issue .

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Regards:
CS Kavita Goel
9560266544

Delhi

[Ganapati Ghatti]

Thank you. 

It falls u/s 62(3). 

Ganapati Ghatti

Mobile: +91-8970797164

[Shweta Daga]

Dear Ganpati,

Since Sec. 62(3) is an independent section. Therefore conversion of unsecured loan will neither fall under right issue nor under private placement.

Thanxs & Regards

Shweta Daga

Mob 7838657554

[Ganapati Ghatti]

That's right. 

What I understood is, Board Resolution to convert loan into equity is sufficient provided the conversion of unsecured loan is granted by the members by way of spl resolution at the time of accepting the unsecured loan.

Hence, conversion of loan into equity is neither Rights Issue nor Private Placement. 

Regards,

Ghatti

[Sonia Yadav]

Yes completely Right. New section 62(3) has been inserted in Companies Act for conversion of Loan into equity.

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From: Ganapati Ghatti <ganapat...@gmail.com>
To: "csmy...@googlegroups.com" <csmy...@googlegroups.com>
Sent: Thursday, January 14, 2016 6:42 PM
Subject: Re: [CSMysore] Conversion of Loan into equity - whether rights issue or private placement.?

[Shweta Daga]

Agreed.

Thanxs & Regards

Shweta Daga

Mob 7838657554

[Sonia Yadav]

But if a Co. has not got approval through SR while entering into agreement for conversion of loan into equity as the Loan taken was may be few years back before applicability of new Co.'s Act or where there is no such clause in Agreement. Then you may follow right issue process.

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From: 'Sonia Yadav' via CSMysore <csmy...@googlegroups.com>
To: "csmy...@googlegroups.com" <csmy...@googlegroups.com>
Sent: Friday, January 15, 2016 10:32 AM

[Rakesh]

Can some one share the Board Resolution for converting loan into equity shares... which was taken under 1956 Act.

[Monika Sharma]

PFA draft resolution

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Thanks & Regards

 Monika Sharma

9891560525

 

csmonika.bhardwaj@gmail.com