Procedure For Conversion of Debentures Into Equity Shares

Procedure-Conversion-of-Debentures-Into-Equity-Shares

Points to be considered before conversion


  1. An issuer shall not convert its optionally convertible debt instruments into equity shares unless the holders of such convertible debt instruments have sent their positive consent to the issuer and non-receipt of reply to any notice sent by the issuer for this purpose shall not be construed as consent for conversion of any convertible debt instruments.

   2. Where the value of the convertible portion of any convertible debt instruments issued by a listed issuer exceeds fifty lakh rupees and the issuer has not determined the conversion price of such convertible debt instruments at the time of making the issue, the holders of such convertible debt instruments shall be given the option of not converting the convertible portion into equity shares: Provided that where the upper limit on the price of such convertible debt instruments and justification thereon is determined and disclosed to the investors at the time of making the issue, it shall not be necessary to give such option to the holders of the convertible debt instruments for converting the convertible portion into equity share capital within the said upper limit.

3. Where an option is to be given to the holders of the convertible debt instruments in terms of sub-regulation (2) and if one or more of such holders do not exercise the option to convert the instruments into equity share capital at a price determined in the general meeting of the shareholders, the issuer shall redeem that part of the instruments within one month from the last date by which option is to be exercised, at a price which shall not be less than its face value.

Procedure For Conversion of Debentures Into Equity Shares

1.   Hold the board meeting and pass Board Resolution.

2. Pass Special Resolution of the members in General meeting. No issue of shares on a preferential basis can be made by a company unless authorized by its articles of association and unless a special resolution is passed by the members in a General Meeting. Prepare Explanatory statement to the special resolution. Explanatory statement should contain the matters specified in section 62.
3.   File Special resolution with ROC in form MGT-14

4.  Allot shares after getting valuation report from Registered valuer. Allotment shall be completed within twelve months from the date of passing of the special resolution. Price of the shares shall be determined based on the valuation report of a registered valuer.

5.   Prepare and Issue Share Certificates as per Form SH-1

6.   A return of allotment of securities shall be filed with the Registrar within thirty days of allotment in Form PAS-3 and with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 along with a complete list of all security holders. Attachments required for form PAS-3 (Return of Allotment )
·      List of Allotees
·      Copy of Board resolution
·      Copy of Special Resolution
·      Valuation report 
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