Conversion of Loan to equity under new law - Some pitfalls
If the financial rehabilitation plan of the company does not yield positive results and if other creditors commence insolvency proceedings, the former lenders, now reduced
to the shareholders are shifted from the first rank to the last rank during the distribution of assets of the insolvent company.
to the shareholders are shifted from the first rank to the last rank during the distribution of assets of the insolvent company.
Viewed by 12
THE VERSION AND CONCLUSION OF SRI MANDAR GODBOLE IS ABSOLUTELY CORRECT AND TO BE ADOPTED SINCE THE BANK LOANS WHETER LENT ON FIXED ASSETS OR WORKING CAPITAL SHALL NOT BE CONVERTED INTO EQUITY SINCE IT IS A LOAN BROUGHT OUTSIDE. THE WHOLE CONCEPT OF THE INTRODUCTION OF THE COMPANIES ACT 1956 WAS ALREADY DIVERTED AND DILUTED . AT LEAST THE SHARE HOLDERS SHALL BE PROVIDED SECURITY INEVITABLY SINCE THE INVESTMENT IS FOR A PROFIT OR A LOSS AND NOT FOR INTEREST LIKE OTHERS . THE ONLY CORRECT & JUSTIFIED APPLICATION IS TO FUND THE INTEREST AND ADD TO THE AMOUNT OF LOAN .
Mar 31
I DID NOT GO THROUGH HE LAW AMENDMENT; HOWEVER IT IS THE USUAL PRACTICE OF THE DIECTORS AND SHAREHOLDERS TO BRING IN UN-SECURED LOANS WHENEVER THERE IS A SHORT FALL IN WORKING CAPITAL DUE TO VARIOUS EFFECTS ; IF PARTICULARLY THE UN-SECURED LOANS FROM DIRECTORS AND SHARE HOLDERS CONVERTED TO EQUITY AT THE TIME OR BEFORE INSOLVENCY , THE SAME IS TO BE CONSIDERED PROPER AND FIT IF THE SINCERETY OF THE PROMOTERS IS UNDERSTOOD IN PERFECT SENSE.
Mar 31
