Companies Act, 2013 Procedure

Procedure for Conversion of Debt or Loan into Securities (Listed Company)

Nupur Rathore Nupur Rathore
Nupur Rathore

Published on: Dec 14, 2020 / Updated on: Feb 26, 2021

(5 Rating)

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.

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]
      • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
      • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
      • Hold a meeting of Board of Directors of the Company and pass the necessary Board Resolution
        • to consider and approve issuing of Debentures or taking Loan with an option to convert it into shares of the Company in future.
        • to fix the day, date, time and venue of the General Meeting and to approve the draft notice convening the General Meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013.
        • to authorize the Director or Company Secretary to sign and issue notice of General Meeting.
        • to authorize Company Secretary or any Director to sign and file the relevant form with Registrar of Companies and to do such acts, deeds and things as may be necessary to give effect to the Board’s decision.
      • Company shall submit the disclosure of Board Meeting within 30 minutes from the conclusion of the Board Meeting and post the same on the website of the Company within 2 working days. [Regulation 30 & 46(3) of the SEBI (LODR) Regulations, 2015]
      • Company shall obtain an in-principal approval from the recognized stock exchange where the shares are listed. [Regulation 28 of SEBI (LODR) Regulation, 2015]
      • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
    2. Filing of Form MGT-14 with ROC [Section 117]
      File Form MGT-14 along with the Board Resolutions with the Registrar of Companies within 30 days of passing the Board resolution in the Board Meeting
    3. Convene General Meeting [Section 96, 100 and SS-2]
      • Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
      • Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive the notice of the General Meeting.
      • Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
      • Hold the General Meeting on fixed day and pass Special Resolution for issuing Debentures or taking Loan with an option to convert these debentures or loan into shares of the company in future.
      • Companies shall disclose the proceedings of General Meeting to the Stock Exchange within 24 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
      • Companies shall submit to the stock exchange the details of the voting results within 48 hours from the conclusion of the meeting and post the same on the website of the Company. [Regulation 44 of the SEBI (LODR) Regulations, 2015]
      • Prepare the minutes of General Meeting, get them signed and compile accordingly. [Refer the Procedure for 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 with the following attachments
      • Certified True Copies of the Special Resolution passed along with Explanatory Statement.
      • Copy of the Notice of meeting sent to members along with all the annexure
      • Shorter Notice Consent Letters from the members in case the General Meeting was convened at shorter notice.
      • Copy of Attendance Sheet of General Meeting
      • Any other attachment as may be applicable.
  • 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]
      • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
      • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
      • Hold a meeting of Board of Directors of the Company and pass the necessary Board Resolution
        • to consider the allotment of Equity Shares against the conversion of debenture or loan already taken by the Company.
        • to delegate authority to Company Secretary or CFO or any one director of the company to sign, certify and file the required form with Registrar of Companies and to do all such acts and deeds as may be necessary to give effect to the Board’s decision.
      • Listed Company shall submit the disclosure of Board Meeting within 30 minutes from the conclusion of the Board Meeting and post the same on the website of the Company within 2 working days. [Regulation 30 & 46(3) of the SEBI (LODR) Regulations, 2015]
      • Listed Company shall submit a statement and a Shareholding pattern separately for each class of shares to the Stock Exchange whenever there is a change in capital structure of more than 2% of the total paid-up share capital of the Company, in format specified by SEBI from time to time within 10 days of the allotment of shares. [Regulation 31 of the SEBI (LODR) Regulations, 2015]
      • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board 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.

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