Introduction and overview
The concept of conversion of Compulsory Convertible Preference Shares (CCPS) into Equity Shares is not governed by any section of the Companies Act, 2013 but if combined the certain Provisions of Companies Act, 2013, one can easily opine the conversion. By complying the provisions of Sections below mentioned conversion of Preference shares into Equity shares can be easily done.
Before getting into the article it is better to know what is Compulsory Convertible Preference Shares (CCPS). There are types of Preference Shares being issued by the Company and one of them is CCPS (Compulsory Convertible Preference Shares).
Compulsory Convertible Preference Shares (CCPS) are those shares which are issued with the terms that it can be converted into n number of equity shares after a period of time (that is mentioned in the contract or as discussed earlier).
Compliance of the Following Sections are required to be done:
- Section 173 and 174 for Convening of Board Meeting and Quorum for meeting of Board
- Section 55 For Redemption of Preference Shares
- Section 64(1)(c) for filing SH-7 for Redemption of Preference Shares
- Section 39(4) for filing of Return of Allotment
- Section 46 and 56 for issue of Certificate of Shares {Section 46 for the issue of Share Certificate and Section 56(4)(c) for delivery of Certificate of Shares}
- Section 88(1)(a) for Register of Members
Following are the steps required to followed for the Conversion of Compulsory Convertible Preference Shares into Equity Shares:
1. Call Board Meeting of the Board of Directors of the Company:
- Issue Notice Agenda of Board Meeting all the Directors at least 7 days before the date of Board Meeting. The meeting can also be called at shorter to transact urgent business items.
2. Hold the Board Meeting and pass Board Resolution for:
- Redemption of compulsorily convertible preference shares
- Conversion of redeemed preference shares into equity shares
3. E-forms Filing with the Registrar of the Companies:
- File e-Form SH-7 within 30 days of the Board meeting for intimation of redemption of preference shares which are converted into equity shares with the following attachment:
- Copy of Board resolution approving conversion of Compulsory Convertible Preference Shares into Equity Shares
- File return of allotment in e-Form PAS-3 within 30 days of the Board Meeting with the following attachments:
- Copy of Board resolution approving conversion of Compulsory Convertible Preference Shares into Equity Shares
- List of allottees
4. Issue of Share Certificates:
- To all allottees within a period of 2 months from the date of allotment of Equity Shares issued under the common seal, if any of the company or signed by two directors or by a director and the Company Secretary, wherever company has appointed a Company Secretary.
5. Maintenance of Statutory Registers:
- Update the register of members in Form MGT-1 after conversion of Compulsorily Convertible Preference Shares into Equity Shares.
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Will stamp duty applicable in the case of conversion of compulsory convertible preference shares into equity shares without consideration ?