Commentary

48.3 Disadvantage to other shareholders

COMPANIES vol 10(2) borrowing and debentures
| Commentary

48.3 Disadvantage to other shareholders

| Commentary

48.3 Disadvantage to other shareholders

It will be apparent from the discussion in Paragraphs 48.1 and 48.2 that convertible debentures offer many advantages to the debenture holder. At the same time they are potentially a problem for the other shareholders, who are in danger of having their shareholdings diluted at any moment and most probably just at the time when they become valuable. Many companies will therefore be reluctant to grant convertible debentures, and it will only be the prospective investor who is in a strong position—perhaps because the company is in desperate need of the money—who can hope to

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