Shares against loan

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viral (Querist)
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20 November 2012 if a director has unsecured loan outstanding in the books of company and company has decided to issue shares against it. whether an agreement is required to be executed for allotment of shares?. whether is it called an allotment other than cash ? or directly form no. 2 for allotment of shares can be filed.
kindly clarify

Ajay Mishra

Ajay Mishra (Expert)
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20 November 2012 Hi

Yes,

To become a shareholder there must be an agreement in writing under section 41(2) of the Companies Act, 1956 between the director and company.

Read case law (In Kumaran Potty v. Venad Pharmaceuticals & Chemicals Ltd. [1996])

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