Dear Sir,
There is one private company having capital and free reserves.
It is planning to convert its reserves into capital by issue of Bonus shares and then to convert the pvt company to LLP.
Now after conversion to LLP, is there any restriction on withdrawal of funds from LLP ?
Partners want to withdraw capital and then they may Dissolve the LLP.
(Accumulated reserves can't be withdrawn till 3 years. So bonus issue is planned)
Bonus shares doesn’t result in additional capital, but it will result in increased holdings. I have this bankruptcy codes here and the partners have to satisfy interests of creditors a.k.a, shareholders after the issue. Also, the company must be a going concern to raise additional capital. Is it issuing bonus shares to partners? If that is the case then, please go through this: https://ibbi.gov.in/uploads/publication/2019-10-11-191135-wv5q0-2456194a119394217a926e595b537437.pdf
The funny part is there is no malfeasance rules regarding voluntary insolvency by the directors of the company. That means they don’t have to give up on their shares in the company and it is not very well defined. But one section addresses that they cannot hide assets of the company during insolvency and not sure if their own share holdings rights are assets or not. This is because, INDAS prescribes share holders capital in the equity section, which means owners equity is entitled to dividends here and during the dissolution of the firm, the profit or loss realised will be their burden.
CAclubindia
