Can You Write Notes On P.T.C (Participation Terms Certificate) And Equity Participation?


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Haider Imtiaz answered
1. P.T.C (Participation Term Certificate): It is an instrument for medium and long term financing. These are issued by joint stock companies to scheduled banks and financial institutions for raising funds. The investor by purchasing the P.T.C becomes entitled to have share in profit and loss of issuing company. The company has to maintain a register in which the P.T.C's issued shall be registered. P.T.C is replacement of debenture finance. Main features as under:

1. P.T.C's are transferable.
2. Profits are shared in agreed ratio.
3. The losses are shared in the ratio of bank and company investment.
4. These certificates are issued for a period of ten years or more.
5. 20% of the P.T.C's are convertible into shares under certain conditions.
6. P.T.C holders have the option to participate in all meetings of the company.

2. Equity Participation: Under this mode of financing, the bank or the financer purchases the share of the company at market price. The bank can become the share holder instead of lender. Main features are as under:
1. The investor purchases the shares to participate in equity.
2. Profits are shared in the form of annual dividends.
3. The losses are shared in the form of reduction in market price of shares.
4. If the company needs more funds the promoters can ask to increase equity base.
5. The shares can only be purchased from stock exchange listed companies.

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