Conversion of unsecured loan from director into capital

Kindly help me to resolve this issue.

There are 2 directors who have given loan to company.These directors have converted their unsecured loan to Share capital without any procedure.These directors have converted loan into share capital at cost.Market price is now more than double the cost price.Say cost price is Rs 100/- and market price is Rs. 600/-.Directors have done this without intimating members.Can members take objection against this act of directors?What is the actual procedure to do this?I would like to tell that this company is private company.

Replies (1)

Hi Chitra,

Here Issue of Shares has to be valued in NRV method if the directors are residents.

If they are non-residents the shares are to be valued in DCF method as per RBI Guidelines.

And here if company are issuing shares at cost price, directors are liable to pay Capital gain taxes for the difference amount.

And in last if members are not agreed with the issue, they can object for the same. 

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