Introduction to Bonds and Their Types

Bonds

• Bonds are a way for companies to raise funds, functioning as debt securities representing loans.
• Bonds, like shares, have a nominal value and grant equal rights (non-administrative).
• Unlike shares, bondholders are creditors, not contributors. Bond funds are treated as loans within the company's assets.
• Bondholders receive fixed interest payments and repayment of the nominal value at maturity.

Bond Types

• Index-linked/structured bonds
• Convertible bonds
• Warrant Bonds
• Subordinated bonds
• Participating bonds

Bond Issuance Limits

• A ratio must be maintained between capital plus reserves and bonds issued (art. 2412, par. 1, 4).
• Bonds are limited to a maximum of twice the subscribed capital (not just paid-up capital).
• Guarantees for bonds issued by other companies are also included in the calculation.
• The ratio between bonds and capital plus reserves must remain consistent during the lifespan of the bond.
• If the limit is violated, the company cannot reduce its share capital (except for losses);
• The ratio is important to regulate the financial health of the company.
• This is to maintain stability, ensuring the company's capability to meet its obligations.

Bond Issuance Procedure

• Directors approve bond issuance, documented in notary minutes and the register.
• Bond issuance resolutions must be legally compliant.
• Information including company name, purpose, share capital, and existing reserves must be clearly disclosed.
• Bond registration details.

Convertible Bonds

• Convertible bonds allow holders to exchange them for company shares at a predetermined ratio.
• Bondholders cease to be creditors and become shareholders upon conversion.
• Issuing convertible bonds requires a separate increase in the company's share capital.
• Issuance conditions - previously subscribed share capital must be paid up; convertible bonds cannot have a lower value than their nominal value;
• Extraordinary shareholder meetings are needed for convertiible bond issuance decisions.
• A cap exists: convertible bond issuance is capped by the company and is typically for a 5 year timeframe.
• Pre-emption rights are protected for existing shareholders if convertible bonds are issued.
• Any capital changes (increase or reduction) will adjust the conversion rate.

Bondholder Organization

• Bondholders' meetings are crucial to decision-making about bond terms and conditions.
• Specialized representative bodies exist concerning these issues.
• Majority rules are important factor. Meetings decisions need to be registered;
• A Bondholders meeting (and their representative) has powers that allow them to address issues with the company as a collective group.