OCD — Optionally Convertible Debenture

Unlike a CCD, an OCD carries genuine optionality: the debenture may be redeemed for cash at maturity or converted to equity shares, at whichever party's election the term sheet grants — commonly the holder, sometimes the issuer. Until the option is exercised, the OCD is unambiguously debt under Section 71, with scheduled interest and a redemption date.

FEMA treats OCDs as debt instruments throughout their life, since the equity outcome is contingent rather than guaranteed at issuance — this makes OCDs a poor fit for foreign investors seeking FDI-route equity exposure, and they appear more often in structured domestic debt or promoter-affiliate financing than in venture rounds.

Where an OCD is later converted, the allotment of the resulting equity shares still requires a board resolution and PAS-3 within 30 days, exactly as for any other conversion event, and the ledger records the redemption-or-convert decision as the trigger.

The cap table, where OCD — Optionally Convertible Debenture appears as a computed field traced to the ledger event that created it.