URGENT | Issue of debentures with an option to convert such debentures into shares

[Ginni Sethi]

Dear Concern,

Greetings of the day.

One of a Company want to issue debentures with an option to convert such debentures into shares through CCPS in future. So while drafting documents of CCD do I write the line below or what would be the correct line. 

1. Approval of Issue and allotment of 36 Unsecured Compulsorily Convertible Debentures and/ or other debt Securities on private placement basis

or

1. Approval of Issue and allotment of 36 Unsecured Compulsorily Convertible Debentures 

Please advise at the earliest.

Thanks & Regards

Gunjan Kumra

8700102393

[CS V Kartik]

You can write quoting the relevant provisions of the Act & say in the last few lines as "be and is hereby accorded to offer, issue and allot, in one or more tranches, 36 Unsecured Compulsorily Convertible Debentures (“CCD”) of Rs. 10/- each at a premium (if any) of Rs. ________/- for an aggregate amount of Rs. _________ /- by way of preferential allotment on private placement basis in one or more tranches to the following Investor:

RESOLVED FURTHER THAT the CCDs shall (i) carry a coupon of ___% per annum, payable on a yearly basis over a period of _______ months / years, up to the date of conversion into equity shares of the Company and (ii) be converted into such number of equity shares or Compulsorily Convertible Preference Shares (“CCPS”) of the Company ............

Kartik

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[Ginni Sethi]

Dear sir,

Right now, I only want to issue CCD and will convert it into CCPS in future. So, at the time of issue, this above mentioned line would be written. Pl guide.

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[CS V Kartik]

You can write it in the manner I have sent by just removing the word of CCPS.

Kartik

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[Ginni Sethi]

Thanks a lot.

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[Ronak Gupta]

Are you trying to issue debentures that are convertible into preference shares, Which will be further convert into equity shares?

Kindly enlighten us over the rationale for the same.

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Thanks & Regards
Ronak Gupta
Company Secretary
Delhi
9910226715

[Nishant Jain]

On lighter note some time client don't have any rational behind there decisions they ask to do whatever favour there situations.

Nishant jain

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[CS V Kartik]

Very true Nishant. Infact I too faced a similar issue where in one of the cases the company had issued CCD with an option to convert it either into equity shares or CCPS. It's totally illogical to convert CCD into CCPS because for converting into CCPS, valuation is required & to convert into shares, again valuation is required. Seperate term sheet is required for that as well. I told the client better finish it by converting directly into shares rather than CCPS. He said he has no choice but to just follow what his investor says. 

Kartik

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[Nishant Jain]

Haha Kind of same problem face by me too 

Nishant jain

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[Ginni Sethi]

Sir,

My client only wants to issue CCD right now and it will convert after 6months these CCDs into CCPS. So, I just want to know what to write as title in MGT 14 and documents.

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[CS V Kartik]

So better you include both the things in the same document like I shared with you in the trailing mail because again preparing the same after 6 months will be very tedious. However, make sure you have the term sheet of CCPS. If available, then you can include the same in Offer letter & other documents.

Kartik

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