Rule 3 - Particulars regarding the terms of issue of debentures or the terms of raising of loans by a public company. - Public Companies (Terms of Issue of Debentures and of Raising of Loans with Option to Convert such Debentures or Loans into Shares) Rules, 1977

Particulars regarding the terms of issue of debentures or the terms of raising of loans by a public company. 03. The terms of issue of debentures or the terms of [1] [raising of loans] by a public company which include a term providing for an option to convert such debentures or loans [2] [or any part thereof] into shares in the company or to subscribe for shares in the company shall not require the approval of the Central Government under clause (a) of the proviso to sub-section (3) of section 81 of the Act, if such terms conform to the following requirements, namely: (a) the debentures or loans may be issued or raised either through private subscription or through the issue of a prospectus to the public; (b) a [3] [public financial institution] [4] [or a scheduled bank] either underwrites or subscribes to or sanctions, the whole or part of the issue of such debentures or the raising of loans, as the case may be; [5] [(c) when and where necessary, the consent of the Central Government under the provisions of the Capital Issues (Control) Act, 1947 (20 of 1947), is obtained for the issue of shares consequent upon the conversion of debentures or loans into equity capital; (d) having regard to the financial position of the company, the terms of issue of the debentures or the terms of the loans, as the case may be, the rate of interest payable on the debentures or loans, the capital of the company, its loans, liabilities, its reserves, its profits during the immediately preceding five years and the current market price of the shares of the company, as may be applicable, the financial institutions [6] [or scheduled banks, as the case may be] provide for the terms including the term providing for an option to convert such debentures or loans or any part thereof, into shares in the company or to subscribe for shares therein, either at par or at a premium not exceeding twenty-five per cent of the face value of the shares:] [7] [Provided that a public financial institution or a scheduled bank shall not convert all or any part of such debentures or loans unless, (a) the company that has issued the debentures or raised the loan has defaulted in the repayment/redemption of, or payment of interest on, such loans or debentures; and (b) such scheduled bank or public financial institution has given the company notice of its intention to convert such loans or debentures at least 30 days prior to the intended date of conversion.] ------------------------------------------- Notes:- [1] Substituted by GSR 623, dated 8-5-1978, w.e.f. 13-5-1978. [2] Inserted, by GSR 623, dated 8-5-1978, w.e.f. 13-5-1978. [3] Substituted by GSR 1489, dated 25-11-1978, w.e.f. 9-12-1978. [4] Inserted by Notification No. GSR 275(E), dated 1-4-2003, w.e.f. 1-4-2003. [5] Substituted by GSR 623, dated 8-5-1978, w.e.f. 13-5-1978. [6] Inserted by Notification No. GSR 275(E), dated 1-4-2003, w.e.f. 1-4-2003. [7] Inserted by Notification No. GSR 275(E), dated 1-4-2003, w.e.f. 1-4-2003.