Can CCD be unsecured?
A compulsory convertible debenture (CCD) is a type of bond which must be converted into stock by a specified date. Unlike most investment-grade corporate bonds, it is not secured by collateral. It is backed only by the full faith and credit of the issuing company. In effect, an unsecured corporate bond is a debenture.
Can we redeem compulsory convertible debentures?
[2] Further a company issuing compulsory convertible debentures, need not execute debenture trust deed or appoint a debenture trustee as it is not securing anything and no payment is to be made at the time of maturity of the CCD converts into equity and not redeemed. …
Can CCD be issued at premium?
“1 CCDs of the face value of Rs 55 each will be automatically and compulsorily converted into 1 equity share fully paid up of Re 1 each at a premium of Rs 54 after 18 months from the date of allotment of CCDs (the conversion date)…,” it added.
Can private company issue unsecured debentures?
Company cannot issue Unsecured NCDs because of following provisions: a) Rule 2(1)(c)(ixa) Companies (Acceptance of Deposits) Rules, 2014 – Deposit excludes any amount raised by issue of non-convertible debenture not constituting a charge on the assets of the company and listed on a recognized stock exchange.
Who can issue CCD?
Accordingly, in terms of the Deposit Rules: Company being a private Company, can issue CCDs to its members, provided that such CCDs necessarily convert into equity within a point not exceeding ten years from the date of its issue.
What is debenture simple words?
A debenture is a type of debt instrument that is not backed by any collateral and usually has a term greater than 10 years. Debentures are backed only by the creditworthiness and reputation of the issuer. Both corporations and governments frequently issue debentures to raise capital or funds.
What is the difference between debenture and shares?
Share is the capital of the company, but Debenture is the debt of the company. The shares represent ownership of the shareholders in the company. On the other hand, debentures represent indebtedness of the company. The income earned on shares is the dividend, but the income earned on debentures is interest.
Can a company issue convertible debentures?
Companies issue convertible debentures as fixed-rate loans, paying the bondholder fixed interest payments on a regular schedule. Bondholders have the option of holding the bond until maturity—at which point they receive the return of their principal—but, holders may also convert the debentures into stock.
Can CCD be issued through rights issue?
Rights Issue: Most of the practicing professionals opine that CCDs cannot be issued by way of rights issue since Section 62 (1) of the Act explicitly mentions issuance of “shares”. Whereas Section 42 states that a company may make a private placement of “securities”.
Can debentures be issued through rights issue?
Securities and Exchange Board of India categorically held that the rights issue of unsecured fully convertible debentures to all the existing equity shareholders cannot be considered either a private placement nor a deemed public offer and, hence, accommodated section 62(3) of the Act as an independent provision to …
Can a compulsorily convertible debenture be made an ECB?
2. Foreign Exchange Management Act ( FEMA) Under the FDI regime, investment can only be made into equity, fully and fully and compulsorily convertible debentures (“CCDs”). Instruments which are not fully and convertible instruments are considered to be external commercial borrowing (“ECB”) and therefore, are governed by ECB regime.
What kind of security is a convertible debenture?
CCDs are hybrid securities, with some attributes of bonds and some like stocks. There are two types of conversion prices. One limits the price to the equivalent of the security’s par value in shares.
How is the conversion ratio of a compulsory convertible debenture determined?
The compulsory convertible debenture’s ratio of conversion is decided by the issuer when the debenture is issued. The conversion ratio is the number of shares each debenture converts in to, and can be expressed per bond or on a per centum (per 100) basis. CCDs are hybrid securities, with some attributes of bonds and some like stocks.
How are convertible debentures considered equity by RBI?
The ITAT observed that the RBI’s policy on convertible debt for FDI purposes is governed by the future repayment obligation in convertible foreign currency. Since CCDs do not have any repayment obligation, they are considered by the RBI as equity.