Right issue of Non convertible debentures or CCD in case of pvt companies.

[CS Manish Kushwaha]

Dear members 

 

A very urgent query

A pvt company want to issue NCD (fully secured) to a infrastructure trust (body corporate) the company has two shareholders X and Y. so basically if the company directly issues NCD to TRUST then it will have to go for private placement Which is long and lengthy process.

 

so query is that , is there anything wrong if company first offers NCD to existing shareholders by way of right issue and they renounce their right in favour of that trust and after that trust purchases the NCD which will lead to process get easier.

 

But section 62(1)(a) is only talking about further issue of shares not securities.

 

In whole Companies act 2013, nowhere is mentioned that a company cannot issue debentures on right basis or bonus issue of debentures.

 

It may also be noted that Section -23(2)

A private company may issue securities— (not only shares)

(a) By way of rights issue or bonus issue in accordance with the provisions of this Act; or

(b) Through private placement by complying with the provisions of Part II of this Chapter

 

Deposit rules clarification:

Any amount raised by company from members or others by way of issue of debentures or bonds secured by first charge or charge ranking pari passu basis or Compulsorily Convertible debentures, shall not be treated as deposits. 

 

 Hence, according to me we can adopt the right issue process for debentures. Most of the members will say no for right issue of debentures but

 

Below is the link where IHCL issued right issue of debentures to their existing shareholders, but query is that, if there is no provision under CA 2013 for right issue of debentures then under which provision or section IHCL issued NCD or CCD on right basis to their existing shareholder. 

 

       http://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20080205-29   

      http://profit.ndtv.com/news/corporates/article-indian-hotels-fixes-rights-issue-price-at-rs-55-per-ccd-571621 

 

    Member’s views are solicited

        

    Thanks

    Manish Kushwaha

 

[CS Manish Kushwaha]

Dear Members, 

I am waiting for your suggestion or expert views

Thanks

Manish Kushwaha

[Dinesh Unni]

we can issue debentures under rights issue mode by complying with section 42 and its rules.

[Tanvi Aggarwal]

Section 42 is for private placement. If you by this mode you do need valuation report.

Here the concept of right issued does not arise

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Regards

Tanvi- Aggarwal
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