On The Legal System Of Convertible Bonds

Convertible bonds, a kind of debentures that can be changed by holders into the stocks of issuers, play a more and more important role in economic area today. In China, Convertible bonds was first provided in Corporation Law in 1993, and put into practice from that year. Although there has been a striking development of this new financial instrument in our country in last ten years, we realized that there are still some flaws in the mechanism of CB. Thus, I try my best to carry out researches on the operation mechanism of CB, comment on the laws concerned, and send out my advice about the perfection of the legal system of CB.In Part â…  , I analyze the general theoretical problems ofconvertible bonds, including the concept, category Characteristicof them, then study the investment value of convertible bonds and atlast construct the frame of the legal operation system of convertiblebonds.In Part â…¡ , I focus on the following problems: (1) The relationship between the capital system and the issue of convertible bonds, (2) the quality of issuers of convertible bonds, (3) the power of convertible bonds issue, (4) terms of bond issue. I consider that company should be the only legitimate issuer in the future, and the power to make decision on issue of convertible bonds should be authorized to the board of directors.In Part â…¢, I explored the legal system of the conversion of convertible bonds. Conversion privilege is the most important right for the bondholders. The option for the holders to exchange the bonds for the shares of the issuing corporation give the holders an opportunity to participate in the issuer's future growth. Then I stressthe way to protect the conversion privilege.In Part â…£, I focus on the mechanism of the interest balance of the convertible bonds, with regard to find a relatively reasonable way to equally protect the interest of there parties (the issuer, the bond holders and the share holders) related to the convertible bonds.Finally, in Part â…¤,I present my normative conclusions and proposals. I consider there is an urgent need to perfect the legal system of convertible bonds to meet the need of development of modern economy and internationalization of convertible bonds. I argue that the practice of convertible bonds needs legal system to guide, which must be scientific and reasonable. So we should fasten our pace of legislation.