Procedure for Conversion of Debt or Loan into Securities Listed Company

Aakanksha Singhal

Aakanksha Singhal

Published on: Dec 14, 2020

Khushboo Sharma

Updated on: Feb 3, 2025

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Introduction

Company takes loan or debt on the terms that the loan or debt will be converted into share capital. This is one of the reliable modes to raise capital without immediate investments.

Mandatory Requirements: Shareholders’ approval by special resolution is required before taking of loan.

Applicable Provisions:

Section 62 , 96, 100, 117, 173 of Companies Act, 2013
Clauses of Secretarial Standard on Board Meeting (SS-1)

Following Procedure is to be followed

Before Issuing of Debentures or Taking Loan
1. Convene a Meeting of Board of Directors [As per section 173 & SS-1]
  - Refer to the Procedure for Conducting Board Meeting for the detailed procedure.
  - Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board [Refer the Procedure for Preparation and Signing of Minutes of Board/Committee Meeting]
2. Filing of Form MGT-14 with ROC [Section 117]
  File Form MGT-14 with the ROC within 30 days of passing Board Resolution in the Board Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and requisite documents.
3. Convene General Meeting [Section 96, 100 and SS-2]
  - Refer to the Procedure for Conducting General Meeting for a detailed procedure.
  - Prepare the minutes of General Meeting, get them signed and compile accordingly [Refer the Preparation and Signing of Minutes of General Meeting]
4. File Form MGT-14 with ROC
  File Form MGT-14 with the ROC within 30 days of passing Special Resolution in General Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and requisite documents.
At the time of Conversion of Debentures or Loan into Securities
1. Convene a Meeting of Board of Directors [As per section 173 & SS-1]
  - Refer to the Procedure for Conducting Board Meeting for the detailed procedure.
  - Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board [Refer the Procedure for Preparation and Signing of Minutes of Board/Committee Meeting]
2. Filing of Form PAS-3 with ROC
  Company shall file return of allotment in Form PAS-3 with the Registrar of Companies within 30 days from the allotment of Share by the Company along with the fee and following documents as an attachment
  - A list of allottees stating their names, address, occupation, if any, and number of securities allotted to each of the allottees and the list shall be certified by the signatory of the Form PAS-3 as being complete and correct as per the records of the company.
  - Certified True Copy of Board Resolution
  - Any Other documents as required.
3. Intimation and Approvals
  - Company shall make an application for listing to the recognized stock exchange where shares are listed within 20 days of allotment.
  - On receiving the listing approval, apply to NSDL and CDSL for capital admission.
  - On Capital admission, apply to the Stock exchange for trading approval.

Conversion of Debt or Loan into Securities (Listed Company)								
Introduction
Company takes loan or debt on the terms that the loan or debt will be converted into share capital. This is one of the reliable modes to raise capital without immediate investments.
Mandatory Requirements: Shareholders’ approval by special resolution is required before taking of loan.
Applicable Provisions:

Section 62 , 96, 100, 117, 173 of Companies Act, 2013
    Clauses of Secretarial Standard on Board Meeting (SS-1)

Following Procedure is to be followed

Before Issuing of Debentures or Taking Loan
        
            Convene a Meeting of Board of Directors [As per section 173 & SS-1]
                
                    Refer to the Procedure for Conducting Board Meeting for the detailed procedure.
                    Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board [Refer the Procedure for Preparation and Signing of Minutes of Board/Committee Meeting]
                
            
            Filing of Form MGT-14 with ROC [Section 117]
            File Form MGT-14 with the ROC within 30 days of passing Board Resolution in the Board Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and requisite documents.
            Convene General Meeting [Section 96, 100 and SS-2]
                
                    Refer to the Procedure for Conducting General Meeting for a detailed procedure.
                    Prepare the minutes of General Meeting, get them signed and compile accordingly [Refer the Preparation and Signing of Minutes of General Meeting]
                
            
            File Form MGT-14 with ROC
            File Form MGT-14 with the ROC within 30 days of passing Special Resolution in General Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and requisite documents.
            
        
    
    At the time of Conversion of Debentures or Loan into Securities
        
            Convene a Meeting of Board of Directors [As per section 173 & SS-1]
                
                    Refer to the Procedure for Conducting Board Meeting for the detailed procedure.
                    Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board [Refer the Procedure for Preparation and Signing of Minutes of Board/Committee Meeting]
                
            
            Filing of Form PAS-3 with ROC
            Company shall file return of allotment in Form PAS-3 with the Registrar of Companies within 30 days from the allotment of Share by the Company along with the fee and following documents as an attachment
                
                    A list of allottees stating their names, address, occupation, if any, and number of securities allotted to each of the allottees and the list shall be certified by the signatory of the Form PAS-3 as being complete and correct as per the records of the company.
                    Certified True Copy of Board Resolution
                    Any Other documents as required.
                
            
            Intimation and Approvals
                
                    Company shall make an application for listing to the recognized stock exchange where shares are listed within 20 days of allotment.
                    On receiving the listing approval, apply to NSDL and CDSL for capital admission.
                    On Capital admission, apply to the Stock exchange for trading approval.

Companies Act, 2013

Conversion of Debt or Loan into Securities (Listed Company)

Aakanksha Singhal

Khushboo Sharma

Introduction

Following Procedure is to be followed

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