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COMPANY LAW – I SYNOPSIS

BONDS: SECURED INVESTMENT
BY: BHAGWAT SHARMA; BC0140019

INTRODUCTION

Bonds are instruments of finance that are used to gather huge sums of money by both
governmental and corporate bodies. Government needs funds for infrastructure projects to social
programmes and companies need money to expand their business since the requirement of
money cannot be met by banks. Therefore, money is raised by issuing bonds in public markets.
Interest are paid by the borrower of the bond to the investor at fixed rate, this interest rate is
called coupon. Bonds have a maturity date on which the issuer pays the borrowed amount to the
investor. This maturity rate can vary from 1 day to 40 years.
A person holding bonds is a creditor to the company, he does not enjoy any voting rights as in
the case of stocks, he has no share in the profits of the company but enjoys a fixed interest rate
(coupon), in case of a bankruptcy he will be given preference over the shareholder. Bonds are
preferred over stocks because in stock a huge amount of risk is involved. A retired person cannot
think to invest his money in risky ventures as now he does not have a fixed income. There are
different types of bonds like government bonds which are issues by the central government,
municipal bonds issued by the city municipalities, corporate bonds in which a company can issue
bonds just like it issues shares, though these bonds carry higher risks than bonds issued by the
government but this is compensated by the higher coupon rates offered by corporate to attract the
investors, zero coupon bonds in which no interest is paid. These bonds are issued on discount
and redeemed at par.
It is concluded that bonds are both a secured and a unsecured form of investment it all

cnn. bond covenants. Investors have the notion that interest paid on bonds are less in comparison to stocks and once money is invested in bonds it can only be redeemed after the bonds get matured. the paper also discusses about the various aspects of bonds that are not known to investors like the regulators in the market and the role played by them. The rate of interest is also dependent on the maturity period of the bond. 1213–1252(1994) This article talks about the interest rate paid on debt security is tax deductible. (2014) http://money.  Hayne E.depends on the type of bond that an investor goes for and from which issuer. "Development of the Corporate Bond Market in India: an Empirical and Policy Analysis". Leland. CNN Money. and optimal capital structure. International Conference on Economics and Finance Research. REVIEW OF LITERATURE  Raghavan. Corporate debt value. 49:4 THE JOURNAL OF FINANCE. The interest on bond depends on whether the economy is going through an inflation phase or not.  Bond investing Risk. 32 The author tells that in case of India.com/magazines/moneymag/money101/lesson7/index5. and D.htm This article talks about Credit risk. S. RESEARCH PROBLEM / STATEMENT OF PROBLEM It is often said that bonds are a secured form of investment and there are no risks in bonds but it is not so the present paper analysis and discusses the debate whether bonds are a secured form of investment or not. All bondholders are not able to make payments on time this depends on their credit rating and their financial health. there are financial institutions like Standard & Poor's and Moody's that evaluate the credit worthiness of corporations and governments and then . the development of the government bond market had a positive effect on the corporate bond market. Sarwano (2012). unlike economies like Korea. IPEDR Vol.

htm This article deals with the call risk which are associated with corporate and municipal bonds where the issuer of the bonds has an option to call back or redeem the bonds before its maturity and they are paid at par. 2006 (b) To know about the debt and equity. Company Law and Practice. Taxmann Publication Pvt Ltd 2015).about. . the researcher chose this book: (a) To know about the different types of bonds.in/2009_11_01 archive. (2014) http://bonds.com/od/bonds101/a/bondrisk. Eastern Book Company 2015). Company Law.  Dr.blogspot. G K Kapoor & Sanjay Dhamija. . ( 20 th edn. ( 16th edn.provide them with credit rating (AAA rating is provided to strongest issuer with high credit worthiness)  Paul Conley. The Risk of bond Investing: understanding dangers in fixed income investing. the researcher chose this work: (a) To know about the Government Securities Act. As per the amended circular the issuer has to maintain a 100% asset cover to discharge the principal amount for the debt securities at all times. Earlier only those companies had to maintain a 100% security covers which issued secured debt securities. G K Kapoor & Sanjay Dhamija. ( 18 th edn. (b) To know advantages and disadvantages of bonds. (b) To know about the rules regarding bonds.  Dr. the researcher chose this book: (a) To know about meaning of bonds.html This blog states that SEBI has amended the debt listing agreement for debt securities. Taxmann Publication Pvt Ltd 2015).  Avtar Singh.  http://sebiupdates. Company Law.

How are creditors protected? 3. RESEARCH QUESTIONS 1. The major hypothesis developed on the basis of study of available literature and evaluation of primary as well as secondary data and work done earlier including related studies is that that bonds are both a secured and a unsecured form of investment it all depends on the type of bond that an investor goes for and from which issuer. Why are bonds considered as secured investment or a better investment option? 2. TENTATIVE CHAPTERIZATION . the study further discusses what bonds are and the risks associated with it and the protection of the creditors with a comparative analysis between Debt and equity along with the advantages and disadvantages of bonds.RESEARCH METHODLOGY SCOPE. OBJECTIVE AND SIGNIFICANCE The following Project aims to study different aspects of bonds. equity? 4. What are the various Advantages and risks involved with bonds? 5. The present study has condensed the topic into why are bonds considered as secured investment option by the investor. some important hypothesis are to be formulated. What is the debate on Debt v. The focal points and assumptions are normally available through the formulation of Hypothesis. How are bonds classified and their various types? HYPOTHESIS In order to conduct a research work.

2006 SECONDARY RESOURCES: .III   Protection of Creditors Protection by means of regulation CHAPTER. 2006 Amendment for debt securities SEBI: Protection of Investors’ Interest Debt v.IV     Government Securities Act.CHAPTER-I  Introduction CHAPTER-II    Meaning of Bonds Variety of Bonds Advantages and disadvantages of Bonds CHAPTER. 1992  Government Securities Act. Equity CHAPTER V  Conclusion  Bibliography WORKING BIBLIOGRAPHY: PRIMARY RESOURCE: STATUTES:  SEBI Act.

and D. .htm Paul Conley. Leland. CNN Money. ( 16th edn. G K Kapoor & Sanjay Dhamija.com/magazines/moneymag/money101/lesson7/index5.ARTICLES REFERRED:   Hayne E. 3. IPEDR Vol. ( 20th edn. G K Kapoor & Sanjay Dhamija. bond covenants. and optimal capital structure. (2014) http://money. Company Law.blogspot.cnn. 32 BOOKS REFERRED: 1. 1213–1252(1994) Bond investing Risk. Eastern Book Company 2015). S. 2. Taxmann Publication Pvt Ltd 2015).html  Raghavan. (2014) http://sebiupdates. Company Law and Practice.in/2009_11_01 archive. Avtar Singh. Company Law. Corporate debt value. "Development of the Corporate Bond Market in   India: an Empirical and Policy Analysis". ( 18th edn. Sarwano (2012). Dr. Taxmann Publication Pvt Ltd 2015). Dr. 49:4 THE JOURNAL OF FINANCE. The Risk of bond Investing: understanding dangers in fixed income investing. International Conference on Economics and Finance Research.