Section 62 – Further Issue of Shares (Preferential Allotment & Conversion of Debentures/Loans)

# Section 62 – Further Issue of Shares (Other than Rights Issue & ESOP)

Apart from Rights Issue [Sec 62(1)(a)] and ESOP [Sec 62(1)(b)], Section 62 allows a company to issue further shares in the following ways:

## 1. Section 62(1)(c) – Preferential Allotment / Private Placement to Any Person

A company may issue further shares to any person (not necessarily existing shareholders) subject to the following three conditions:

## 2. Section 62(3) – Conversion of Convertible Debentures or Loans (Pre-approved)

No fresh approval is required at the time of conversion if:

• The terms of issue of the convertible debenture or loan were already approved by a Special Resolution at the time of issue, AND
• The option of conversion was part of those approved terms.

## 3. Conversion of Debentures/Loans Taken from Government

Where a company has obtained any debenture or loan from the Government, and the Government — if it considers it necessary in the public interest — may, by order, direct that such loan/debt be converted into shares of the company.

### Key Features

• The order can be passed even if the terms of issue did not include any conversion option.
• The terms of conversion shall be such as may be reasonable to the Government.

### Right of Appeal

If the terms of conversion are not acceptable to the company, the company may appeal to the Tribunal (NCLT) within 60 days of the date of the conversion order.

### Factors Considered by Government While Determining Terms

1. Financial position of the company

2. Terms of issue of the original debenture/loan

3. Rate of interest payable on the debt

4. Other relevant factors

## Effect of Such Conversion (on Company's Capital Structure)

This is a deemed alteration – no separate procedure under Section 13/61 is required.