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Issue of shares against loan (Corporate Law)

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This query is : Resolved

Author : Anonymous

( Author )
08 December 2011

Can a Pvt Company issue shares to the company who is related party against loan taken from such company. And what will be formalities? Can this shares be iisued at pemium?


CMA. CS. Sanjay Gupta

( Expert )
10 December 2011

Yes Shares can be issued upon conversion of loan into equity. It can be issued at a premium. No problems with that.


CMA. CS. Sanjay Gupta

( Expert )
10 December 2011

Special resolution for issue of equity shares consequent upon conversion of loan into equity


"RESOLVED THAT:
(a) Pursuant to section 81(1A) and other applicable provisions of the Companies Act, 1956 consent of the Company be and is hereby accorded to the issue and allotment of ..... equity shares of Rs. 10 each to ........, at a premium of Rs..... per share credited as fully paid up, in lieu of and against conversion of part of the rupee loan to the extent of Rs.... lakhs taken by the Company from ......;
(b) The new equity shares to be so allotted shall be subject to the Memorandum and Articles of Association of the Company;
(c) The new equity shares shall rank pari passu in all respects with the existing equity shares of the Company except that, they shall only rank for dividend in the year of allotment pro rata from the date of such allotment upto the end of the Company's financial year next following;
(d) No Letter of Allotment shall be issued to ........, and the share certificates in respect of the new equity shares to be allotted as aforesaid shall be completed and delivered within three months from the date of allotment;
(e) For the purpose of giving effect to this Resolution, the Board of Directors of the Company be and is hereby authorised to do and perform all such acts, deeds, matters and things as they may in their absolute discretion deem necessary, desirable or appropriate to settle any question, difficulty or doubt that may arise in regard to the new equity shares as they may think fit."


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