Q.Explain the procedure a company must follow to issue debentures under the Companies Act, 2013.
You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.
Start your 14-day free trial to unlock the full solution →The Companies Act, 2013, together with the Companies (Share Capital and Debentures) Rules, 2014, lays down a defined procedural sequence for the issue of debentures, and a Gujarat board Std 12 Secretarial Practice student should be able to set this sequence out step by step.
The process begins with a resolution of the Board of Directors, passed at a duly convened Board meeting, since the power to borrow money and to issue debentures for that purpose is a power the Board exercises under Section 179(3) of the Companies Act, 2013. Where the company proposes to attach a conversion option — allowing the debentures to be converted into equity shares at redemption — Section 71(1) additionally requires that this option itself be approved by a special resolution passed at a general meeting of the shareholders, because converting debt into equity alters the company's ownership structure in a way the Board alone cannot authorise; a special resolution, together with compliance with the private-placement conditions of Section 42, is also generally required where debentures are offered otherwise than to the public.
Where the company proposes to issue secured debentures, or to make an offer or invitation to the public, or to more than the prescribed number of persons, Section 71(5) requires that one or more debenture trustees be appointed before such issue or offer is made, and their written consent obtained in advance; the trustee's statutory duty under Section 71(6) is to protect the interests of the debenture-holders throughout the life of the issue. Closely connected to this appointment is the execution of a debenture trust deed under Rule 18 of the Companies (Share Capital and Debentures) Rules, 2014, which formally records the security offered and the rights and duties of the trustee and the company. …
Unlock everything free for 14 days
- Full step-by-step solutions
- Concept-first explanations
- Methods, shortcuts & mistakes
- PYQ mapping + timed mock tests
Full access for 14 days. No credit card required.