Conversion of Loan into Share Capital

[Guest]

A Company received loan from a person and at a future date it is converting the same into share capital. Whether it can do so. If yes for calculating the due date of filing Form 2, the date which has to be considered is the date of receipt of loan or date on which loan is converted into shares.

[DEV KUMAR KOTHARI]

Shares can be allotted after obtaining share application with request to adjust the loan advanced by applicant

The date of allotment of shares  will be the date relevant for entry of credit to share capital a/c, entry in register of members and date for filing return of allotment.

Adjustment of loan  against share application money , on request of  loan creditor   cannot be called 'repayment of loan' by borrower , for the purpose of S. 269T. however, the AO may raise a dispute in this regard.

AI Summary

Conversion of loan to shares: allotment date controls capital credit and filing; adjustment may not equal repayment. A company may convert a loan into share capital by receiving a share application requesting adjustment of the loan and allotting shares; the date of allotment is the relevant date for credit to share capital, entry in the register of members and filing the return of allotment, and adjustment of loan against application money is not treated as repayment though the assessing authority may dispute that view.