Debentures convertible into shares (art. 334 LGS)
Article 334 of the General Companies Law governs convertible debentures into shares, with a preemptive right for shareholders to subscribe them.
What article 334
Article 334 establishes the regime for debentures convertible into shares.
When debentures are convertible into shares: 1) shareholders shall have preference for their subscription in proportion to the shares they hold, with the right of accretion; 2) if the issue is below par, the conversion may not be carried out to the detriment of the integrity of the capital.
Source: Law 19.550, art. 334 — InfoLEG (updated official text)
Commentary
The convertible debenture is debt that may be transformed into a shareholding. Since it affects current shareholders (possible dilution), the law gives them preference to subscribe it, just as in a capital increase.
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