How a company can issue debentures?
When a company invites application from the public to apply for debentures, it can issue its debentures in either of the following ways: When the issue price and face value of a debenture are equal, it is known as the issue of Debenture at Par.
What are the conditions under which debentures cannot be issued?
1. Debentures cannot be issued with voting rights. 2. A company cannot issue debentures to more than 500 people without appointing a debenture trustee, whose duty would be to protect the interest of Debenture Holders and redress their grievances. 3. On issue of debenture a company shall create a Debenture Redemption Reserve. (DRR) 4.
Can debentures be issued to more than 500 people?
Debentures cannot be issued with voting rights. 2. A company cannot issue debentures to more than 500 people without appointing a debenture trustee, whose duty would be to protect the interest of Debenture Holders and redress their grievances. 3. On issue of debenture a company shall create a Debenture Redemption Reserve.
Can debentures be issued as a share capital
Debentures are not part of share capital, it is a loan capital and company is liable to pay interestthereon whether there are profits or not. As per 71 (2) Company can’t issue debentures carrying voting rights. Therefore, Debentures holders don’t have any voting rights. Provisions regarding Issue of Secured Debenture.
What are the things to keep in mind while issuing debentures?
Things to keep in mind while issuing debentures: – 1. Debentures cannot be issued with voting rights. 2. A company cannot issue debentures to more than 500 people without appointing a debenture trustee, whose duty would be to protect the interest of Debenture Holders and redress their grievances.
What is meant by second debentures?
The Debentures that are repaid after the first debentures are known as Second Debentures. What does the Issue of Debenture at Discount means
What are second debentures and how to invest in them?
Second debentures are those the repayment of which follows that of first debentures. If investors have their eyes fixed upon incomes with fewer risks associated, debentures are the appropriate thing. There are no voting rights involved with debentures. Thus the control of equity shareholders on the management is not diluted.
What is the meaning of debenture?
By means of debenture, the government and the companies issue loans. It can be termed as the IOU bond between the purchaser and the issuer. Companies, when in need of an extension, borrow money at a fixed interest rate and thus, use debenture for the expansion purpose.
Is debenture a collateral security?
Often issue or circulation of debentures is done as collateral security. Debenture is an instrument of loan. Interest is paid at a fixed rate every year and debentures is known as “fixed cost bearing capital”. Debenture has a common seal of the company. Debenture is redeemable at a fixed and specified time.
What is the meaning of redeemable debentures?
Redeemable Debentures: These debentures are payable at the expiry of their term. Which means at the end of a specified period they are payable, either in the lump sum or in installments over a time period. Such debentures can be redeemable at par, premium or at a discount.
Can debentures be issued for non-cash considerations?
Debentures can be issued for non-cash considerations. The company may have purchased assets from some vendors or acquired some other business. Then instead of paying cash, the company may issue debentures to such vendors. Such an issue for debentures can be at par, or for a discount or at a premium.
What is the law on issue of debentures in India?
In India, the key legislation regulating the concept of Issue of Debentures are as follows: Rule 18 of the Companies (Share Capital and Debenture) Regulation, 2014. The different types of Debentures in India are as follows:Issue of Debentures – Advantages, Types, P…swaritadvisors.
What is issue of debentures in India?
What is Issue of Debentures in India. This is an advantage of being a debenture holder. They are considered to be the creditors in case of winding up or bankruptcy of a company and they are the ones who should be repaid first. Issuance of the debenture is one of the ways of raising debt finance for the company.
What are the laws regulating the issue of debentures?
The laws regulating the issue of debentures are section 71 of the Companies Act 2013 and Rule 18 of the Companies (Share Capital and Debenture) Regulation 2014. Why is Discount on Issue of Debentures an Asset
Can debentures be issued by a private company?
Debentures can be issued by a private company only through the route of the private placement. A company can issue debentures with an option to convertible into equity shares, either partially or fully, at the time of redemption of the debentures.
Does Rule 18 apply to secured debentures?
[it should be noted that Rule 18 applies only in the case of secured debentures] 1. The Company shall make an issue of Secured Debentures provided the date of its redemption shall not exceed 10 years from the date of it issue.