Certain advantages for conversion of loan into equity share capital of the Company:
- No cash exchange occurs in the debt-to-equity swap.
- Increasing cash flow by decreasing liabilities.
- Avoidance to paucity of financial resources.
Process chart for Conversion of Loan into Equity shares
Section 62 (3) of Companies Act, 2013
Important Note: It is mandatory to pass the special resolution at the time of acceptance of Loan with the term of conversion into equity share capital in future.
Implications for non-filling of e-form MGT 14 within 300 days from the date of passing of Special Resolution:
What can be the amount of Penalty which MCA can levy?
The amount of maximum twenty-five lakh rupees can be levied on the Company. The penalty of maximum Five Lakh rupees can be levied on each director and other officers of the Company.