The MCA has recently released the Draft Public Companies (Terms of Issue of debenture and of raising loans with option to convert such debentures or loans into shares), 2011. The rule if and when becomes effective will supersede the Public Companies (Terms of Issue of debenture and of raising loans with option to convert such debentures or loans into shares), 1977.
The 2011 rules are more or less similar to the 1977 rules albeit one significant difference. As per the 2011 rules a public financial institution or a bank can now only convert all or any part of the debentures, if (a) the company has defaulted in the repayment of, or payment of interest on, such loans and debentures; and (b) the bank or public financial institution has given the company a notice of its intention to convert the debentures at least 30 days prior to the intended date of conversion.
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