Agreement For Conversion Of Unsecured Loan Into Equity
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Conversion Of Unsecured Loan To Equity Pursuant To Section 62(3) Of Companies Act, 2013Compliance at the time of taking a loan. Hold a Board Meeting for.Compliance at the time of converting the loan to equity. Hold a Board Meeting and pass a resolution for allotment of shares by converting the loan to equity.
A "debt-equity swap" involves translation of existing debt capital into equity. The focus of a debt/equity swap is not to introduce fresh capital, but to convert capital into financial and legal equity. A company might also choose to convert its debt to equity in order to improve its cash flow.
If a company has taken any unsecured loan from its directors and wants to convert such unsecured loan into equity at some future period of time, then it has to ensure to enter into debt conversion agreement with such directors at the time of accepting such loan and also to pass a special resolution.
If companies fails to repay its debt, then the government allows it to convert their debt into equity. Both public as well as private companies are eligible for the said conversion.
Before taking out a loan, approve a special resolution approving the terms of the loan, and file the special resolution in e-Form MGT-14 within 30 days. By making a resolution at the Board Meeting, convert the loan into shares, and file e-form PAS-3 for allotment of shares under the Companies Act, 2013, within 30 days.