I have a question about a $2M convertible debenture in New York State. The maturity date was December 31, 2000. The public company liable to pay the debenture went out of business
, and no claim was filed by the debenture holder. I believe that New York State has a six-year statute of limitations on such debt, so it appears that the debt itself is not collectible through the courts.
However, I now want to resurrect the public company shell through a reverse merger (since it has many shareholders
Question: Even though the statute of limitations has expired on collecting the debt itself, can the holder of the debenture subsequently exercise his right to convert that debt into shares? (My understanding is that the debt still exists, even though it cannot be collected through the courts after the statue to limitations has expired.) However, I am NOT aware of any statute of limitations on the CONVERSION RIGHT. Hence my concern. (A theoretical legal argument can be made that the purpose of the statute of limitations on debt is to achieve some finality, but I don't want to rely on the type of argument one might make in a higher court.)
Of course, I could ask the holder of the debenture to sign a release, but if I do so, they then may want to be paid for that, either in dollars or shares, or both, so I'd rather not ask unless I have no other choice.