New
Delhi: The government has now allowed all scheduled
banks to convert debentures or loans of a company into
shares without having to go through a special resolution.
Earlier, the facility was available only to public financial
institutions.
The
department of company affairs (DCA) had recently amended
the Public Companies Terms of Issue of Debentures and
Raising of Loans with Option to Convert such Debentures
or Loans into Shares Rules, 1977, for this purpose.
However,
cooperative banks, regional rural banks and foreign banks
cannot use these options, the DCA said. Besides, this
move comes with a caveat. The department has stated that
a public financial institution or a scheduled bank will
not convert all or any part of such debentures or loans
unless the company that has issued the debentures or raised
the loan has defaulted in the repayment or redemption
of, or payment of interest on, such loans or debentures.
Further,
such scheduled bank or public financial institution will
have to give the company notice of its intention to convert
such loans or debentures at least 30 days prior to the
intended date of conversion.
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