Q.State the provisions of the Companies Act, 2013 regarding the issue of debentures.

Because a debenture-holder has no vote to protect their own interest with, Section 71 of the Companies Act, 2013 builds a set of external, mandatory safeguards around every debenture issue instead.

The issue of debentures is governed chiefly by Section 71 of the Companies Act, 2013, read with the Companies (Share Capital and Debentures) Rules, 2014. Because a debenture-holder holds no vote and no management control, the Act steps in with a coherent set of external, mandatory safeguards.

Section 71(1) permits a company to issue debentures with an option to convert them, wholly or partly, into equity shares — but only where the issue of such convertible debentures has first been approved by a special resolution passed at a general meeting; an ordinary, non-convertible issue needs no such special resolution. Section 71(2) is an absolute bar: no company shall issue any debenture carrying voting rights, keeping company control strictly with its members regardless of how large a debenture-holder's stake becomes. Section 71(3) requires that where debentures are to be secured, the company must create a charge on its assets in favour of a Debenture Trustee — typically a scheduled bank, public financial institution, or insurance company — appointed under a Debenture Trust Deed before the issue opens, so that the whole body of debenture-holders' interests are protected by one accountable Trustee rather than left to scattered individual holders. Section 71(4) obliges every company issuing debentures to create a Debenture Redemption Reserve (DRR) out of profits available for dividend, usable for no purpose other than redeeming those very debentures, ensuring funds are genuinely set aside well before the redemption date. Section 71(5) binds the company to redeem its debentures strictly in accordance with the terms stated at the time of issue, and Section 71(8) allows the Tribunal …

Students frequently cite 'Section 71' as a blanket answer without identifying which sub-section covers which safeguard, losing marks in a Secretarial Practice paper that specifically tests sub-section-level knowledge. Another common error is assuming the special-resolution …