The debt still exists. It is well settled law that the statute of limitations is "an affirmative defense that must be plead and proved". It relates to litigation and does not extinguish the underlying debt, but makes it uncollectable in court. In my opinion the debenture is still convertible into shares, and must be dealt with. In any event, it is going to remain on the books and must be dealt with on your K's and Q's. Try to make a deal, making it clear to the holder of the debenture that if you do not buy this shell, he will get zero.
You seem to be saying that not only will the conv. debenture remain on the books, but so will all the other "plain vanilla" debts. The latter does not make as much sense to me, but if true, do I need to get all the other debt holders to sign off as well in order to use the shell?
No the debenture is different from the other debts. If the other debts are old enough, your CPA should agreed with you that they are uncollectable. But try and get a CPA to sign off on writing down the debenture and you will see that he will not. You may wish to think about an "in and out" prepackaged bankruptcy to clean up the shell before you merge into it.
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