How debentures are converted into shares?

A debenture is converted into equity shares. A notice of the conversion is sent, and the debenture holders are asked to return debenture certificates. Secretary carries out the process of allotment of the shares. After allotment, changes have to be made in the Register of charges.

How are debentures converted to shares?

Under Companies Act, 2013, Section 71(1) authorizes the Company to issue Debentures with an option for Conversion of Debentures into Equity Shares. The above option of Conversion of Debentures into Equity Shares shall be approved by a special resolution passed by the Board in the General Meeting.

How do you convert debentures?

A letter of option is sent to debenture holders and one copy of the same is filed with SEBI. The secretary then verifies the consent sent by debenture holders for conversion. Debenture is converted into equity shares. A notice of conversion is sent and debenture holders are asked to return debenture certificates.

Can debentures be converted to preference shares?

A convertible debenture is a type of long-term debt issued by a company that can be converted into shares of equity stock after a specified period. … These long-term debt securities pay interest returns to the bondholder like any other bond.

Is conversion of debentures into shares a source of fund?

In simple words, conversion of debentures into equity shares means to convert loan liability into capital liability. After converting debentures into equity shares, debenture-holder becomes shareholder. He will get right to vote. Without liquidation, their invested money will not be refunded.

What is difference between share and debenture?

Shares are the company-owned capital. Debentures are the borrowed capital of the company. The person who holds the ownership of the shares is called as Shareholders. The person who holds the ownership of the Debentures is called as Debenture holders.

Can debentures be sold?

NCDs cannot be withdrawn before maturity. Since NCDs are listed on the stock market they can be sold in the secondary market.

What are the types of debentures available?

How do debentures work?

A debenture is an agreement between a business and its lender enabling the lender to put a charge on the business’s assets. … This gives lenders the security of knowing they’ll be able to recover the money they’re owed if the business can’t repay the loan.

Is debenture a debt?

A debenture is a type of debt instrument that is not backed by any collateral and usually has a term greater than 10 years. … Both corporations and governments frequently issue debentures to raise capital or funds. Some debentures can convert to equity shares while others cannot.

What do you mean by C * * * * * * * * * preference shares?

What are cumulative preference shares? Cumulative preference shares contain all the features and benefits of ordinary preference shares such as entitlement to higher dividend payouts, preference in payment of dividends, and preference in payment over equity shares during liquidation of the company.

What is a 5% preference share?

5 Preference shares

The amount of the dividend is usually expressed as a percentage of the nominal value. So, a £1, 5% preference share will pay an annual dividend of 5p. … On a winding up, the holders of preference shares are usually entitled to any arrears of dividends and their capital ahead of ordinary shareholders.

Who is a debenture holder?

A debenture is a way that larger, public limited companies might borrow money at a fixed rate of interest. The company borrows money from the lender, who’s then called a “debenture holder”. … Unlike shareholders, debenture holders can’t vote at companies’ general meetings.