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UHey guys, I have a bunch of doubts regarding CCDs and hope you can help me out.
1. Prior to maturity, are CCDs considered as debt or equity? If it is debt, can there arise a situation where before maturity a CCD could still be treated as equity?
2. Given that debentures themselves cannot give voting rights, once a CCD is converted to shares, will these shares be identical to equity shares that give voting rights to the holder or will these shares still not give voting rights?
3. Consider a situation where CCDs were issued, stating that after a certain period the amount paid, say ‘x’, will be converted to equity shares. What would happen if on the date of maturity, this amount ‘x’ is more than the net worth of the company? How would shares be allotted then? Will it lead to dilution of existing shareholder’s equity or would the company go into insolvency?
Any clarity on these questions would be greatly appreciated. Thank you.
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