India 
Canada
1. Verify Articles of Association (AOA)
• Check whether the AOA permits conversion of loan into equity.
• If not permitted, alter the AOA by passing a Special Resolution.
2. Board Meeting
• Issue notice of Board Meeting (minimum 7 days before meeting).
• Pass Board Resolution for:
o Approval of conversion of loan into equity.
o Fix date, time, and venue for Extra-Ordinary General Meeting (EGM), if needed.
o Drafting of notice for EGM.
o Authorization of director to issue notice.
3. Terms of Loan Agreement
• Ensure that the loan agreement contains a clause allowing conversion into equity.
• The conversion must be approved before or at the time of Loan disbursal. As per Rule 2(1)(c)(ix) of the Companies (Acceptance of Deposits) Rules, 2014, a loan is not considered a deposit if it is Convertible into equity and the terms were fixed upfront.
4. Approval by Shareholders (if required)
• Hold EGM and pass Special Resolution under:
o Section 62(3) – if conversion is part of loan agreement.
o Section 62(1)(c) – for preferential allotment (not mandatory if already approved under loan terms).
• File MGT-14 with ROC within 30 days of passing special resolution.
5. Valuation Report
• Obtain Valuation Report from a Registered Valuer as per Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014.
• Determine fair price of shares for conversion.
6. Allotment of Shares
• Conduct a Board Meeting to:
o Approve allotment of equity shares to the lender
o Authorize filing of return of allotment.
7. File Return of Allotment (Form PAS-3)
• File PAS-3 within 15 days from the date of allotment.
• Attach:
o Board resolution.
o List of allottees.
o Valuation report.
o Special Resolution (if applicable).
o Copy of loan agreement.
8. Issue Share Certificates
• Issue share certificates to the lender within 2 months from the date of allotment.
• Pay stamp duty on share certificates as per respective state laws.
9. Update Registers
• Update Register of Members (Form MGT-1).
• Update Register of Share Allotments.
