Question

What is the significance of the optionality clauses allowed by the RBI in equity shares and convertible preference shares/debentures?

a.

It obliges investors to hold the securities indefinitely

b.

It allows investors to exit at an assured price

c.

It facilitates buy-back of securities from investors

d.

It requires investors to convert their securities into equity

Answer: (c).It facilitates buy-back of securities from investors Explanation:Optionality clauses, without any option or right to exit at an assured price, may be allowed in equity shares and compulsorily convertible preference shares/debentures. These clauses obligate the buy-back of securities from investors at the price prevailing at the time of exercise of the optionality.

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Q. What is the significance of the optionality clauses allowed by the RBI in equity shares and convertible preference shares/debentures?

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