Can you please explain the prohibitions on the disposal of shares as - ProProfs Discuss
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Can you please explain the prohibitions on the disposal of shares as a bond provision and some of the other various restrictions mentioned in the text?

Asked by Mackenzie, Last updated: Feb 09, 2022

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

The disposal of the shares of a subsidiary by the company issuing the debt. This means the company that issues the debt may be prohibited from selling the shares they own in a subsidiary company. People who bought the bonds from the issuer may have believed that the subsidiary makes the issuer stronger and makes the debt safer. To prevent the issuer from weakening the position of the debt holder, a clause may state that the issuer cannot sell their shares in a particular subsidiary. The issuance of debt or shares by a subsidiary of the company issuing the debt - a company owned by the issuer may be prohibited from issuing debt or shares in order to protect debt holders of the parent company.

The disposal of the debt or the shares of another subsidiary by the parent company -This one suggests that the disposal of debt or shares of another subsidiary by the parent company may be prohibited. To me this suggests that the clause applies to debt being issued by a subsidiary company and the prohibition refers to the actions of the parent company in relation to an unrelated subsidiary company. The amalgamation or merger of a subsidiary, unless the surviving company is the parent company or a subsidiary a merger or amalgamation of a designated subsidiary can take place only if the surviving company is either the parent company or a subsidiary.

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