These conditions are meant to ensure that only firms with a good financial record can issue CP.As per the guidelines, a firm is authorised to issue commercial paper provided: Since, the instrument is unsecured, if the company fails to pay the amount due, the buyers of the instrument, have no claim on the company’s assets.Since it is an unsecured source of finance, it is regulated by the apex bank of the country.
Financing companies, provided that they comply with the relevant conditions laid down by the Minister of the Economy and provided that the proceeds from these issues do not consist of redeemable funds from the public within the meaning of Article L. Entities other than those referred to in Article 1 and 1a, provided that they fulfil the legal status, minimum capital and auditing requirements for launching a public offer of financial securities or for their financial securities to be listed on a regulated market and whose equity capital is specified by a decree, or equivalent conditions for entities with their head office abroad.
They must belong to one of the following categories:3.
The Banque de France may ask the issuer to supply additional information.
The financial documentation to be submitted to the Banque de France can be written in French or in a language other than French that is customary in the financial sphere, in cases where the securities can only be subscribed to or purchased for an amount equal to at least EUR 200,000 or the equivalent amount in another currency, and on the condition that the issuer inserts a notice in the financial documentation advising the investor, where applicable, to consult a French translation of the documentation, under the conditions laid down by order of the Minister of the Economy.
The primary purpose of issuing commercial paper is to raise short-term funds so as to meet working capital requirements of the firm.
However, firms also raise money through CP’s to fill the gap between fund required currently and long term funds raised from the market.CP’s are sold at a discount but redeemed at face value.Thus, the effective pre-tax cost will be calculated as: In India, commercial paper can be issued by large corporates, primary dealers and all-India financial institutions.And due to this, only companies with high credit ratings are eligible to sell their commercial paper at reasonable prices.Further, due to the shorter maturity period, the rate of return is relatively low.Issuers incorporated outside the European Economic Area must submit accounting data that has been audited in accordance with a public oversight system that is deemed equivalent by the European Commission.If the issuer is a company that is responsible for cash management within a group, the accounting data must be submitted for the group as a whole based on the consolidated financial statements of the consolidating company.4° A declaration by either an individual, stating their identity and their role within the company, or by a legal entity, indicating their company name and their place of incorporation, in which they accept responsibility for the financial documentation and certify that, to the best of their knowledge, the information submitted by the issuer is accurate and precise, that no information has been omitted such that the significance of the information may be altered, and that the documentation does not contain any false or misleading statements.Negotiable debt securities can be issued at a price other than par, and can offer a redemption premium.If, at issuance, a negotiable debt security does not guarantee the repayment in full of the capital, there must be a warning to this effect in the financial presentation report. 213-3 of the Monetary and Financial Code are authorised to issue negotiable debt securities:1.Credit institutions, investment firms and the Caisse des Dépôts et Consignations, provided that they comply with the relevant conditions laid down by the Minister of the Economy;1a.