Investment law

[xhonpo]

What is the name of your state? Texas

Can money that is invested in a company be used to pay on prior business operating debt?

 

[efflandt]

Businesses do that all the time. Companies often sell additional stock to pay off their debt (interest paid for borrowing or bonds they issued is an expense that eats into earnings), so they can hopefully devote more of their future earnings to expanding their business to increase their earnings.

Or are you talking about the debt of some unrelated business that the business you are investing in does not benefit from?

 

[abmyers]

It depends. I'm guessing this is not a publicly traded company as they usually don't make foolish mistakes like using debt proceeds for illegal purposes. If your investment was an equity investment (shares of the company or part ownership) you have no more say than your votes, if you have that. Debt is different. Debt typically has covenants that restrict how the company can act. If you are a bondholder/ lender, review your debt covenants, but my guess would be the company is likely acting within their limits.