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What are the pre-requisites for a company to make the public issue of FCDs/ PCDs/ NCDs?
The pre-requisites which a company has to follow to make the public issue of FCDs/PCDs/NCDs are as follows:-
1. For NCDs which is known as Nonconvertible Debentures and PCDs which is known as Partly convertible debentures the maturity period should be less than 18 months in this duration it is not necessary to create a charge or appoint a trustee. If the charge is not created on the debentures then they are called as unsecured and will be treated as deposits. In PCDs, premium account during conversion has to be stated and predetermined in the prospectus. Everything from redemption amount to the maturity period has to be stated in the prospectus.
2. For FCDs and PCDs which has to be issued in the past and the conversion has to be made at a price which has to be determined by the Controller of the capital and SEBI.
3. Equity shares of all the companies are listed which are having nationwide trading terminals for atleast 1 year. Warrant and the security must be issued for a period of time. In case of NCDs the holder of the equity warrants is been given an option to buy specific number of shares from company to a predetermined price.
4. In case of FCDs the interest won't be paid to the investors and fully paid FCDs will be converted automatically into shares.
5. Warrants must be issued as a security by the company granting the right to the holder to purchase specified number of shares at specified price any time prior to the exipry date.
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