Filing mgt-14 for conversion of loan to equity

The conversion of a loan into equity is a specific corporate action governed by the Companies Act, 2013. Based on the legal provisions, here is the clarification regarding your query:

Can you proceed without the original MGT-14?

If the original loan was taken without the prior approval of a Special Resolution (under Section 62(3)) and the corresponding filing of Form MGT-14 at that time, you cannot simply proceed with the conversion as a standard Section 62(3) transaction.

Because the mandatory condition (prior shareholder approval via Special Resolution) was not met at the time of accepting the loan, you cannot retrospectively "fix" it. Instead, you must treat the current conversion as a Preferential Allotment under Section 62(1)(c) of the Companies Act, 2013.

The Required Procedure (Preferential Allotment Route)

Since you missed the initial Section 62(3) procedure, you must now follow the steps for a preferential allotment of shares:

1. Valuation Report: You must obtain a valuation report from a Registered Valuer (as per Section 247) to determine the fair price of the shares being issued.

2. Board Meeting: Convene a Board Meeting to approve the proposal for the preferential allotment of shares against the outstanding loan and to call an Extraordinary General Meeting (EGM).

3. General Meeting: Pass a Special Resolution at the EGM to approve the preferential allotment of shares.

4. Filing MGT-14: You must file the new Form MGT-14 with the Registrar of Companies (ROC) within 30 days of passing this new Special Resolution.

5. Allotment: Pass a Board Resolution for the allotment of shares.

6. Filing PAS-3: File Form PAS-3 (Return of Allotment) with the ROC within 30 days of the allotment, attaching the valuation report, the new Special Resolution, and the Board Resolution.

Summary

• Can you convert now? Yes, but not by just filing PAS-3.

• Why? Because the conversion now requires compliance with the Preferential Allotment provisions (Section 62(1)(c)) since the original loan terms did not include the necessary shareholder approval.

• Required Filing: You must pass a new Special Resolution for the preferential issue, file Form MGT-14 for that resolution, and then file Form PAS-3 for the allotment of shares.

Summary: You cannot proceed by filing only PAS-3 because the original loan lacked the mandatory pre-approval (Special Resolution) required under Section 62(3). You must now treat the conversion as a preferential allotment under Section 62(1)(c), which necessitates passing a new Special Resolution, filing Form MGT-14, obtaining a valuation report, and then filing Form PAS-3 for the allotment.