Conversion of Director Loan

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ANUJ (Querist)
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26 November 2022 Can a private limited company issue share to director against his unsecured loan and director is also the shareholder in the company.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 November 2022 The Companies Act, 2013 first time came up with the new provision of converting the loan into equity pursuant to Section 62 (3) of the Companies Act, 2013.

This section provides an option to Companies to convert their loan into equity subject to the mandatory condition that such loan is attached with an option to convert it to equity at some future period of time and such option has been approved by shareholders through a special resolution.

Thus only such loan can be converted which has an option to convert into equity and special resolution has been passed in that respect.