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Convertible Preference Shares

Vinod Kashyap (XBRL Training) (451 Points)

20 May 2007

A Private Limited Company wants to raise funds by issue of Preference Shares to a Foreign Company which will be automatically converted in Equity Shares after the expiry of one year.

Plz suggest the procedure to be followed :-

(a) under the Companies Act

(b) External Commercial Borrowings Guidelines

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2 Replies

The One (379 Points)
Replied 20 May 2007

Hi Vinod, As per a report on May 4, 2007 all foreign funds raised by Indian companies through the issue of ‘partially convertible’, ‘non-convertible’ and ‘optionally convertible preference shares’ will be treated as debt and will be subject to guidelines applicable for external commercial borrowings (ECBs) and ‘convertible preference’ shares will be considered as share capital and should be taken to calculate foreign equity. So give me some more details like your the sector in which the investment is being made by the foreign company you can pm me the details if you need to.