Conversion of Loan into Equity by a lender if the company is unable to repay the loan. This process is known as debt-to-equity conversion.The conversion can be done through the issuance of equity shares, preference shares, or debentures. The terms and conditions of the conversion, including the number of shares to be issued and the conversion price, must be agreed upon by the lender and the company.
What is Equity?
Hold a board meeting
A company shall convene a board meeting by giving 7 days prior notice. For the following agenda to be approved-
Resolution for acceptance of loan
Resolution for conversion of loan into Equity.
Issuance of notice for Convening Extra Ordinary General Meeting.
Hold Extra Ordinary General Meeting
After giving 21 clear days’ notice or shorter notice as the case may be, convene an extraordinary general meeting to approve the conversion of the loan into equity.
Filing of e- Form MGT-14 within 30 days of passing of the special resolution. The company shall enter into a loan agreement with a lender where the terms and conditions for conversion of loan into equity are mentioned.
Hold a second board meeting by giving 7 days’ notice for passing a resolution for allotment on the conversion of loan into equity.
Filling of e-Form PAS-3 within 30 days of passing of the resolution.
Documents/Attachments required for the mentioned Forms:
MGT-14
PAS-3
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