Who Is a Debenture-holder? Occasions for Correspondence, and Essentials of a Good Letter

Recalling Who a Debenture-holder Is

As the Issue of Debentures chapter already established, a debenture, under Section 2(30) of the Companies Act, 2013, is a certificate acknowledging that the company has borrowed a stated sum of money and promises to repay it, with interest at a fixed rate, on the terms stated at issue. The person who holds that certificate — the debenture-holder — is therefore a creditor of the company, not a member of it: the holder has lent the company money and is owed a fixed return and eventual repayment, but, by Section 71(2) of the Companies Act, 2013, carries no voting right at the company's general meetings and no say in how the company is managed. This is the one fact that shapes every letter in this chapter: a debenture-holder is written to as somebody the company owes money to, in a tone of clear, prompt, businesslike information — never as somebody being consulted or asked to decide anything about how the company is run.

Occasions Requiring Correspondence with Debenture-holders

A Company Secretary corresponds with debenture-holders, individually or as a body, on several recurring occasions across a debenture's life:

1. Allotment — informing a successful applicant how many debentures have been allotted, and their distinctive numbers.
2. Regret and refund — informing an unsuccessful or partly-successful applicant that debentures could not be allotted, in whole or in part, and returning the application money paid on the un-allotted portion.
3. Payment of interest — informing debenture-holders that interest has been declared and credited for a period, or enclosing an interest warrant.
4. Redemption — notifying debenture-holders, ahead of the due date, that their debentures are to be redeemed, and the procedure to receive repayment.
5. Conversion — for convertible debentures only, informing the holder that the debentures, or a portion of them, have been converted into equity shares.
6. Less frequently: acknowledging a transfer of debentures from one holder to another, recording a change of registered address or bank account for interest payment, or issuing a duplicate debenture certificate where the original is lost.

Essentials of a Good Letter to a Debenture-holder

Whatever its specific purpose, a letter from the Secretary to a debenture-holder should always contain:

1. The company's own letterhead — name, registered office address, and CIN.
2. The debenture-holder's name and registered address, exactly as recorded in the Register of Debenture-holders.
3. The holder's folio number and the distinctive numbers of the debentures the letter concerns — a debenture-holder may hold debentures under more than one folio, so this identifying detail is never optional.
4. A short, specific subject line stating exactly what the letter is about.
5. A courteous, formal salutation and complimentary close.
6. The precise information or instruction — an amount, a date, a rate of interest, a ratio of conversion — stated once, clearly, and never left ambiguous.
7. A list of enclosures, wherever a cheque, interest warrant, share certificate, or discharge form accompanies the letter.
8. Signature, name, and designation of the Company Secretary, signing for and on behalf of the Board. …