Question: Can CCD Be Redeemed?

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..

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.

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.

Who can issue convertible debentures?

Only companies dealing in infrastructure projects, non-Banking Financial Companies, Infrastructure Debt Fund and companies permitted by central Government or Ministry or RBI can issue secured debentures for more than 10 years and less than 30 years.

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.

What are the advantages of convertible bonds?

Advantages and Disadvantages Of Convertibles The advantage for companies of issuing CBs is that, if the bonds are converted to stocks, the company’s debt vanishes. Additional advantages for issuers include: Lower fixed-rate borrowing costs. Locking into low fixed-rate long-term borrowing.

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…•

Can debentures be converted into equity shares?

Convertible debentures are converted into equity shares on maturity. The conversion date and rate of conversion is stated in the prospectus. The company does not redeem convertible debentures. Convertible debentures can be classified into fully convertible and partly convertible debentures.

Can a company issue unsecured debentures?

Yes. Pursuant to Section 71 of the Companies Act, 2013, a Private Limited Company can issue unsecured debentures with an option to convert such debentures into shares, either in whole or in part at the time of redemption.

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.

Which company can issue debentures?

Provided that an Infrastructure finance companies, Companies engaged in Infrastructure projects, Infrastructure Debt Fund Non-Banking Financial Companies and Companies permitted by Ministry or Department of Central Government or by RBI can issue Debenture beyond a period of 10 years but up to 30 years.

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 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.

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 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.