Optionally Convertible Debentures

[Rinkesh]

Dear Learned Professionals, 

Can somebody tell me what are the compliances that needs to be done post issue of Optionally Convertible Debentures (OCDs)?

Thanks in advance.

Regards,

Rinkesh

[Vivek Hegde]

Dear Rinkesh,

Issue of OCDs is not allowed under new Companies Act, 2013. Kindly refer to Acceptance of Deposit Rules.

Warm Regards

CS Vivek Hegde,B.com, FCS, CWA

Vivek Hegde & Co.
Company Secretaries
No. 2034, 26th Cross, K.R.Road
Banashankari II Stage, Behind 

Sevakshetra Hospital

Bangalore-560070
Mob : 09900898223

Off: 080 26710677

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[Rinkesh Saraiya]

Dear Vivek,

Section 71(1) of Companies Act, 2013 says "A company may issue debentures with an option to convert such debentures into shares, either wholly or partly at the time of redemption", so I was talking with regards to that.

Regards

​​

,

Rinkesh 

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[Vivek Hegde]

Dear Rinkesh,

But as per deposit rules following is the exempted deposit:

Any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking pari passu with the first charge on any assets referred to in Schedule III of the Act excluding intangible assets of the company or bonds or debentures compulsorily convertible into shares of the company within five years.

So, if the debentures are optionally convertible, it will be treated as deposits. I feel under Section 71 only secured OCDs can be issued.

Procedure:

1. You have to follow Section 71 and 62 or 42 as the case may be.

2. Filing of MGT-14, PAS-3 and creation of charge

Warm Regards

CS Vivek Hegde,B.com, FCS, CWA

Vivek Hegde & Co.
Company Secretaries
No. 2034, 26th Cross, K.R.Road
Banashankari II Stage, Behind 

Sevakshetra Hospital

Bangalore-560070
Mob : 09900898223

Off: 080 26710677

[Rinkesh Saraiya]

Thank you Vivek for the detailed reply.

Regards,

​​

Rinkesh

[Sravanthi Raviteja]

Hi Vivek,

If CCDs are issued to non-member, is it to be treated as private placement? 

What about creation of DRR in case of CCD's?

With best regards,

CS Sravanthi Raviteja

[CS Prem Tiwari]

No DRR required in case of CCDs and issue of CCDs shall be governed by sec. 42, 71 & 62 if u r not going for public issue.

[Manoj Mishra]

Dear Vivek Ji,

I have little different views. Rule 2 (1) (c) (ix) reproduced as follows :-

"Any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking pari passu with the first charge on any assets referred to in Schedule III of the Act excluding intangible assets of the company"

 or

"bonds or debentures compulsorily convertible into shares of the company within five years."

Therefore if OCD issued as per Sec 71 (1) AND fully secured with first charge on assets of equivalent amount of OCD is not a deposit.

For exemption from deposit it must either be adequately charged as per deposit rule or if not charged it must be compulsorily convertible within 5 years.

So far as DRR is concerned as per Rule 18 (7) (c) certain companies are required to create 25% mandatory DRR.

Regards,

Manoj

[CS Prem Tiwari]

Manoj Ji,

For CCDs there is no requirement of DRR.

On Wednesday, August 20, 2014 at 4:38:50 PM UTC+5:30, Rinkesh wrote: