For example, if a company stipulates that stocks can be replaced by cash at a premium of 20 percent, and if the market price of the stock is $20 million, then $24 million in cash is needed, of which $4 million is the premium, which is actually a deposit.
The reason for charging a cash-in-lieu premium is that, for securities that use cash-in-lieu, the fund manager is required to buy the securities after trading resumes, and the actual purchase price (or the actual settlement price of the securities), plus the relevant transaction costs, may differ from the latest price at the time of the subscription.