Certain advantages for conversion of loan into equity share capital of the Company:

  • No cash exchange occurs in the debt-to-equity swap.
  • Increasing cash flow by decreasing liabilities.
  • Avoidance to paucity of financial resources.

Process chart for Conversion of Loan into Equity shares

Section 62 (3) of Companies Act, 2013

Phase 1:

Compliance Before acceptance of Loan

Important Note: It is mandatory to pass the special resolution at the time of acceptance of Loan with the term of conversion into equity share capital in future.

Phase 2:

Compliance at the time of conversion of Loan into share capital

Implications for non-filling of e-form MGT 14 within 300 days from the date of passing of Special Resolution:

Compounding for Condonation of Delay

What can be the amount of Penalty which MCA can levy?

The amount of maximum twenty-five lakh rupees can be levied on the Company. The penalty of maximum Five Lakh rupees can be levied on each director and other officers of the Company.

About the Author

ACS Divya Goel

Author is Divya Goel, ACS working as Assistant Manager- Company Secretary with Neeraj Bhagat & Co. Chartered Accountants, a Chartered Accountancy firm helping foreign companies in setting up business in India and complying with various tax laws applicable to foreign companies while establishing their business in India. Author can be reached at info@neerajbhagat.com.

Author Bio

Qualification: CA in Practice
Company: Neeraj Bhagat & Co.
Location: New Delhi, New Delhi, IN
Member Since: 28 Feb 2019 | Total Posts: 22
Neeraj Bhagat & Co. is helping foreign companies in opening up of Liaison/ Branch Office in India and complying with various tax laws applicable to foreign companies while establishing a business in India. Neeraj Bhagat is the founder of Neeraj Bhagat & Co. Chartered Accountants, a Chartered View Full Profile

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