Procedure and Compliance on Increase in paid-up capital by conversion of unsecured loan into shares in a private company

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CONVERSION OF UNSECURED LOAN INTO SHARE CAPITAL

 

Any Company facing the shortfall of the fund in the company can convert their unsecured loan in the Capital of the Company with the permission of shareholder in the Meeting

PROCEDURE FOR CONVERSION

  1. HOLDING OF BOARD MEETING

A proper Board meeting should be held as per the section 173 of the Companies Act, 2013, a board resolution regarding the taking of loan and conversion of option attached to it should be proposed by the Board of Directors. After approval of the same, that shall be forward to the General Meeting for the approval of the members of the Company.

  1. HOLDING OF GENERAL MEETING

After the approval from the Board of Directors of the Company, approval from the members of the Company required in the General Meeting.

  1. An extraordinary general meeting should be held as per Section 100 of the companies act, 2013.
  2. Required 21 clear days’ notice for the Extraordinary general meeting mentioning Date, time, a place for the General meeting.
  3. The notice should have an annexure of explanatory statement for all the special business to be transacted at the proposed EGM as per Section 102 of the Companies Act, 2013.
  4. Special resolution should be passed with a vote of the majority of shareholders.

Note: at the time of actual conversion of unsecured loan into capital valuation report from the registered valuer is required if the allotment is done through preferential allotment

  1. FILING OF MGT-14

After approval from the members of the Company Special resolution has to be filled with the Registrar of Companies within 30 days of the passing of the Resolution.

Attachments required

  1. EGM resolution
  2. EGM notice along with an explanatory statement.

 

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