• Share holding of directors

We are a private limited with two directors and two spouse directors. I am running the business. Other director is not involved in the day to day business . He has the role of getting business from market which he is not able to full fill He is not investing additional funds required to keep up the business. In net,I have invested one crore in advances more than him. Now business is picking up. He is not investing further. I am forced to invest further to take forward business. I am not getting either interest payments for my one crore advance.

Can I demand conversion of advances in to shares?
Asked 6 years ago in Business Law

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8 Answers

Yes, you can invest more and make another partner as sleeping partner or investing or amount as per debenture share @ 5-20% interest p.a. that will be suitable. In the future prospective points you.

Ganesh Kadam
Advocate, Pune
13008 Answers
267 Consultations

  • loan can be converted into shares by passing a resolution in the Board Meeting & File e-form PAS-3 for allotment of shares under the Companies Act, 2013 within 30 days
  • Also, issue share certificate by passing Board Resolution & file e-form MGT-14 within 30 days to start the procedure for issue of shares by the private limited company.

Ajay Sethi
Advocate, Mumbai
99811 Answers
8147 Consultations

Yes you can go that

Prashant Nayak
Advocate, Mumbai
34540 Answers
249 Consultations

1. Yes. you can convert your investments into Share holding, PROVIDED a proper BOD resolution is passed for the purposes and approval is taken from ROC.

2. An Non-Performing director (executive level) can also be removed by passing an BOD resolution and updating the statutory requirements with ROC. Such Director holding Share will remain a mere Share Holder in the co., but will not be a director.

Hemant Agarwal
Advocate, Mumbai
5612 Answers
25 Consultations

You can take a route of Debt-to-Equity Swap but this is available option to lender and not to investor. But you can claim your stake in the company acc.to percent of investment. Board resolution will pass.


Or by order of company tribunal. 

Yogendra Singh Rajawat
Advocate, Jaipur
23082 Answers
31 Consultations

under Companies Act, 2013 loan can be convert into share. Company needs to pass a special resolution for conversation.

Mohammed Mujeeb
Advocate, Hyderabad
19325 Answers
32 Consultations

1. Yes you can convert your investment into shares but only with permission of other director. 

2. Or you can show your investment in Business as loan and claim interest from business.

 

Mohit Kapoor
Advocate, Rohtak
10686 Answers
7 Consultations

The investment and conversion of the same into shares will find an anser in the company's AOA or memorandum of understanding or the partnership deed.

If any company accepted loan before 1st April 2014 (As per Companies Act, 1956) and wants to convert loan into Equity shares at present company then Company can't convert such loan into shares according to section-62 of Companies Act, 2013 except if company passed the special resolution at the time of acceptance of .loan amount.

Conversion of loan into equity share capital is most reliable mode to raise capital without immediate investments. In order to carry out smooth business, at times, debt is converted into share capital.

In order to convert loan into share capital, as per provisions of section 62(3) of the Companies Act, the company has taken loan on the terms that the loan will be converted into share capital and such option has been approved by special resolution before taking of loan then in such case subscribed capital can be increased.

It must be noted that it is at most important to pass the special resolution at the time of acceptance of the loan without passing of special resolution; loan cannot be converted into share capital.

T Kalaiselvan
Advocate, Vellore
90013 Answers
2497 Consultations

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