A company decides to offer ‘debentures’ on rights basis and provides that each debenture comes with an attached warrant that would be compulsorily converted into a share upon payment of additional consideration

Accounting Nov 20, 2020

A company decides to offer ‘debentures’ on rights basis and provides that each debenture comes with an attached warrant that would be compulsorily converted into a share upon payment of additional consideration. A shareholder contests the issue calling it misleading and illegal. The company defends itself by stating that this does not amount to ‘tie-in’ sale. The company is right.

(a) Yes (b) No