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

Clarification sought on Form 2 filing date for loan conversion to shares; allotment date is key per Section 269T. A company received a loan and plans to convert it into share capital. The query seeks clarification on the appropriate date for filing Form 2: the loan receipt date or the conversion date. The response advises that shares can be allotted upon receiving a share application requesting loan adjustment. The relevant date for credit entry to the share capital account, entry in the register of members, and filing the return of allotment is the allotment date. It is noted that adjusting the loan against share application money is not considered loan repayment under Section 269T, though disputes may arise.