1) Any Loans taken are regarded as 'deposits' under the Companies Act, 2013. As per the definition of the term 'deposit' under section 2(31) : "deposit" includes any receipt of money by way of deposit or loan or in any other form by a company,

2)As per notification MCA GSR 464(E), dated 5th June, 2015, a private limited company can accept deposits only from its members up to 100% of its paid up capital and Free Reserves & Securities Premium account provided it files with the Registrar information about such acceptance.

3)Hold a Board Meeting for proposing acceptance of fixed deposit. In the said Board Meeting itself, approve the Notice for holding general meeting of the company for obtaining the approval of the shareholders for the said proposal.

4) Hold the general meeting of the company and obtain the approval of the shareholders by means of special or ordinary resolution for authorizing the Board of Directors to accept the deposits.

5) To file a copy of such resolution within 30 days of date of passing the resolution with the Registrar of Companies

6) you can offer discount to investors at time of conversion into equity shares

7)since you are not in position to pay interest offer discount to existing investors at time of conversion

Hi , your query can be best answerd by a chartered accountant .. Kindly get back if there are any legal questions regardig company act .. Thanks

Hi,

As per the provisions of Companies Act 2013 the loan from the member of the company is accepted. As per notification MCA GSR 464(E), dated 5th June, 2015, a private limited company can accept deposits only from its members up to 100% of its paid up capital and Free Reserves & Securities Premium account provided it files with the Registrar information about such acceptance.

Now the best way could be for this company to include all those willing to provide the loan as the member of the company which will give you ample space to receive money in form of equity share capital and also provide for no payment of interest as the company is no revenue company.

Dear Client,

Convertible loan agreement if permissible for substantial amount raised. Compare the amount with ur invested capital in ur company.

1) First of all, can convertible loans of Rs. 2-10 lakhs be accepted from each shareholder in a pre-revenue private limited company ? ---- who r investor, NIR or local residents.

2) Second, can we offer discount to investors on market value at the time of conversion into equity shares ? We are planning to convert loan into equity on market value of the share at the time of conversion. For e.g. every Rs. 100 of loan will fetch equity shares worth Rs. 100 at the market value of the share. We wish to offer them discount of Rs. 20 so they will receive each share worth Rs. 100 in Rs. 80 thereby increasing number of shares for the respective loan amount. - note is repayable at the option of the holder; or (b) convertible into equity shares (within a period of 5 years from the date of issue) upon occurrence of specified events according to the terms of the Note.

3) Third, as company does not have revenue or profits it is impossible to offer yearly interest. If discounts cannot be offered what can be other methods to offer appreciation to the investor in a compliant manner ? -

The investors would desire to invest or finance or fund the company but in the form of debt where the debt should get converted into equity before the next round of funding at some discount so that they get to benefit as early investors“

Note” has been defined as an instrument issued by a “startup” evidencing a debt which is either (i) repayable at the option of the holder or (ii) convertible into equity within a period of five years (from the date of issue) upon occurrence of certain events mentioned in the note.

The minimum issue size per investor must be at least Rs 25 lakh or more in a single tranche.

This is also reasonable and implies that a “startup” cannot issue a convertible note to an investor looking to invest less than Rs 25 lakh. The government, perhaps, wants only “serious” investors to benefit from a note.

Convertible notes are freely transferable and can be acquired/transferred by way of sale, provided the sale is in accordance with the pricing guidelines prescribed by the RBI.

By clarifying this, the RBI has shown its intent to treat convertibles notes at par with equity shares as much as possible.

The RBI by its February 17, 2016 notification defines a “startup” as a private company which is not more than five years old and does not have a turnover in excess of Rs 25 crore. Additionally, the “startup” must also be working towards “innovation, development, deployment or commercialisation of new products or processes or services driven by technology or intellectual property” whose certification has to be procured from one of the agencies mentioned in the February 17, 2016 notification.

All these are about convertible debts.

The other details can be decided as per the prevailing circumstances in your side.

The exemption notification specified that the provisions under Section 73 of the Act will not be applicable to the private limited companies accepting deposits from members which are less than 100% of its paid up share capital and free reserves.

company can accept convertible loan from its shareholders after obtaining a[approval from shareholders in its general meeting