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shares issued other than cash

VIVEK MALAVE (Chartered Accountant) (378 Points)

13 June 2019

can company issue shares from payable amount to directors .
and also from deposit of members kept at balancesheet liability side

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10 Replies

CS M Pota (Company Secreatary) (3180 Points)
Replied 13 June 2019

You mean to say to issue shares to the directors instead of payment which otherwice to be made in cash and against the deposit to the deposit holders which otherwicse to be paid in cash to them?

VIVEK MALAVE (Chartered Accountant) (378 Points)
Replied 13 June 2019

to Malay
yes correct

CS M Pota (Company Secreatary) (3180 Points)
Replied 13 June 2019

In my view the shares can be issued because the Comapnies Cat 2013does not show any restrictive provisions.At the same time provision sin the Articles of the Company and prior consent of the Directors and deposit holders should be taken .

CS M Pota (Company Secreatary) (3180 Points)
Replied 14 June 2019

Please the above be read as :In my view the shares can be issued because the Companies Act.2013 does not show any restrictive provisions.At the same time provisions in the Articels of the Company should be cheched and prior consent of the directors and deposit holders should be taken.:

Inconvenience is regretted.

VIVEK MALAVE (Chartered Accountant) (378 Points)
Replied 14 June 2019

whether it will be considered as shares issued other than cash
and
sec 42 and 62 of co act applicable here

Jatin Bajaj (CS) (2928 Points)
Replied 14 June 2019

As per the provisions of Section 62 of the Companies Act 2013, the amount payable to Directors can be utilized by issuing the shares.

Suppose the Company has taken the loan from the Directors and instead of repaying the Loan, the Company can issue the shares to the Directors instead of loan. Provided that before obtaining the loan amount, there must be the agreement between the Company and the Directors that such loan amount shall be converted into equity and company shall pass special resolution before obtaining loan in general meeting. Company shall file MGT 14 within 30 days of passing special resolution.

Next step is to convert the loan into shares by passing the Board resolution and issue the shares by filing Form PAS 3 within 30 days of passing board resolution.

Within 30 days of issue of shares, the Company shall issue the share certificates

VIVEK MALAVE (Chartered Accountant) (378 Points)
Replied 14 June 2019

thank you jatin sir
1. whether your answer will change if company has not take it as loan . instead of that company has taken it as deposit from director and members

2. and as per your opinion you stated that "Provided that before obtaining the loan amount, there must be the agreement between the Company and the Directors that such loan amount shall be converted into equity and company shall pass special resolution before obtaining loan in general meeting. Company shall file MGT 14 within 30 days of passing special resolution."
if company not following the same should as ca we should qualify the report???

CS M Pota (Company Secreatary) (3180 Points)
Replied 14 June 2019

Originally posted by : VIVEK MALAVE

whether it will be considered as shares issued other than cashand sec 42 and 62 of co act applicable here

When any shraes are issued to wards payment of consideration for any asset(s) is / are purchased or any services are vailed the it is called shares are issued for other then cash.In short when any cash are not received towards issue of shares then it is so called .

CS M Pota (Company Secreatary) (3180 Points)
Replied 14 June 2019

So far as loan is concerned now adays after so many cases in which fraud ,non repayment of loan, has come in to the light now many banks have started to incorporat a cluse in the Loan Agreement that if any default is made in repayment of loan along with interest the outstanding principal amount with out standing interest will be converted in to Equity and the Comapny has to allot shares equivalent to that much outstanding amount.The Coman,y if required, has to increase it authoruised share capital clause for issuing such shares.