| Commentary

48.2 Conversion price

| Commentary

48.2 Conversion price

Where convertible debentures are used, it is normal to make some provision in the debenture for the price at which the debentures are to be converted into shares. A common provision allows the debenture holder to subscribe for the new shares at par. This is, in fact, a very favourable deal. The option will only be exercised when the company is prospering, and in this event it is virtually certain that the net asset value of the shares will be greater than par, so that the debenture holder is effectively able to buy his shares for less

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