Can CCDS Be Redeemed?

What is debenture and share?

Shares and debentures both are ways to raise capital however debentures are borrowed capital whereas shares are a portion of the company’s capital itself.

Covered ahead are their key differences between shares and debentures for your understanding..

How do you convert CCD to equity?

Hold Board Meeting and pass the Board Resolution for Conversion of CCD into Equity Shares along with approving Notice of Genernal Meeting for the approval of Shareholders of the Company. 3. Hold General meeting of the Shareholders of the Company and pass the Special Resolution for Conversion of CCD into Equity Shares.

Can CCD be converted into NCD?

As per Section 45 of IT Act, the conversion of debentures into shares is not a transfer. Hence no capital gain arises on the conversion. However, the conversion of CCD into share capital is a transaction.

Why do companies issue convertible debentures?

Companies issue convertible bonds to lower the coupon rate on debt and to delay dilution. A bond’s conversion ratio determines how many shares an investor will get for it. Companies can force conversion of the bonds if the stock price is higher than if the bond were to be redeemed.

Are debentures transferable?

Debentures are freely transferable by the debenture holder. Debenture holders have no rights to vote in the company’s general meetings of shareholders, but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures.

Can compulsorily convertible debentures be redeemed?

When they are issued it is a debt, after a period of time / milestone, it shall be compulsorily converted into shares. … Section 71 of the Act states that a company could issue debentures with an option to convert into shares either wholly or partly at the time of redemption.

Can a company issue redeemable debentures?

Redeemable Debentures: Redeemable debentures are those which are payable on the expiry of the specific period (Maximum period 10 years from the date of issue) either in lump sum or in Installments during the life time of the company. Debentures can be redeemed either at par or at premium.

Why do companies issue debentures?

Why do company issue debentures, when they can borrow money from Bank. Debentures are loan which company borrow’s from general public . … ex- borrowed fund can be used only for capital expenditure or they limit companies ability to raise additional funds till this loan is repaid.

Is CCDs a debt or equity?

Although debentures are undisputedly debt instruments, CCDs are debentures that are mandatorily converted into equity according to pre-determined terms at a pre-defined time. In the pre-conversion stage, the CCD holder is considered as a debtor by the company and is required to be paid interest on its investment.

What is conversion of debentures into shares?

In a simple sense, the Conversion of Debentures into Equity Shares means to change the loan liability into a capital liability. After the Conversion of Debentures into Equity Shares, the Debenture Holder becomes Shareholder. The shareholders will get the right to vote.

Why do companies issue bonds instead of stocks?

When companies want to raise capital, they can issue stocks or bonds. Bond financing is often less expensive than equity and does not entail giving up any control of the company. A company can obtain debt financing from a bank in the form of a loan, or else issue bonds to investors.

Can FPI invest in unlisted NCD?

FPIs are permitted to invest in unlisted NCDs bonds issued by an Indian company subject to a minimum residual maturity of three years and end-use restriction on investment in real estate business, capital market and purchase of land. The custodian banks shall ensure compliance with this condition.”

Can NBFC issue NCD?

Any corporate or NBFCs are eligible to issue NCDs if it fulfils the criteria mentioned below: The NBFCs or corporate is having a tangible net worth of not less than Rs. 4 crore according to the latest audited balance sheet.

Can LLP issue NCD?

The partners of Limited Liability Partnership (LLP) have limited liabilities. As per the companies act 2013, LLP cannot issue debenture for fundraising. If it has a capital requirement, only partners can contribute as they have no rights to issue debt instrument.

Can debentures be redeemed before maturity?

When the total amount of debentures is paid to the debenture holders in lump-sum on maturity or even before maturity, it is known as Redemption of debentures in lump-sum.

What are different types of debentures?

Types of DebenturesRedeemable and Irredeemable (Perpetual) Debentures.Convertible and Non-Convertible Debentures.Fully and Partly Convertible Debentures.Secured (Mortgage) and Unsecured (Naked) Debentures.First Mortgaged and Second Mortgaged Debentures.Registered Unregistered Debentures (Bearer) Debenture.More items…•

Is convertible debt good or bad?

Many of the other disadvantages are similar to the disadvantages of using straight debt in general. To the corporation, convertible bonds entail significantly more risk of bankruptcy than preferred or common stocks. Furthermore, the shorter the maturity, the greater the risk.

What happens when a convertible note matures?

Maturity Date: Convertible notes carry a maturity date, at which the notes are due and payable to the investors if they have not already converted to equity. … The most common method of conversion occurs when a subsequent equity investment exceeds a certain threshold. This is called a qualified financing.