Analysis Of The Mechanism Of The Interest Balance Of Convertible Bonds

In this paper, I focus on the mechanism of the interest balance of convertible bonds from a legal perspective and by using the methods of comparative analysis, uniting theory with practice and legal economics as well. I analyze the mechanism of the interest balance of convertible bonds in the issuing system, converting system and other particular system of convertible bonds. With reference to the relevant experience of advanced countries, I make a study on the legal system of convertible bonds of our country. Apart from the preface, the paper contains four parts.In part 1, I analyze the basic theoretical problems of the mechanism of the interest balance of convertible bonds. I make a general study on the concept and legal nature of convertible bonds. This part establishes that the issuer, issuer's shareholder and bondholder are all independent interests, which should be protected equally. In the end, I focus on the balance of the system of convertible bonds from a legal perspective.In part 2, I discuss the mechanism of the interest balance in the issuing system of convertible bonds. I first discuss the relationship between corporate capital system and convertible bonds. In the second, I discuss the quality of issuer of convertible bonds. I consider that public corporation should be the main issuer of convertible bonds. With regard to the power to make decisions on issue of convertible bonds, I consider that the power should be authorized to the board of directors. In the end, I analyze the mechanism of the interest balance in the terms of bond issue.In part 3, I discuss the mechanism of the interest balance on the conversion of convertible bonds. Conversion privilege is very important for the bondholders. The option for the holder to exchange his bond for shares of the issuing corporation give the holder an opportunity to participate in the issuer's future growth. I explore the mechanism of the interest balance on the conversion price, conversion periods and other issues.In part 4, I focus on the mechanism of the interest balance in some particular system of the convertible bonds. The issuer has its own independent interest and right, which is beneficial to its shareholders and bondholders. Comparative to the corporate issuer and its shareholders,bondholders are weaker, so the bondholders need special protection in order to guarantee their interests. In the last, I probe into the problem on protection of the issuer's shareholders. I consider it's very important for shareholders to get the preemptive right to convertible bonds.