Q.Explain the conditions under which debentures may be issued and redeemed.
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Start your 14-day free trial to unlock the full solution →A debenture's issue price and its redemption price are two separate matters, and a company decides each independently — a single debenture can, for instance, be issued at a discount but redeemed at a premium.
On issue, a debenture may be issued at par, where the price charged equals its face value — a ₹100 debenture issued at par costs the subscriber exactly ₹100. It may be issued at a premium, where the price exceeds face value — a ₹100 debenture issued at a ₹5 premium costs ₹105, and the ₹5 excess is credited to a Securities Premium Account, usable only for the purposes stated in Section 52 of the Companies Act, 2013, such as writing off preliminary expenses. Or it may be issued at a discount, where the price is below face value — a ₹100 debenture issued at a ₹5 discount costs ₹95; unlike shares, the Companies Act, 2013 places no special statutory restriction on issuing debentures at a discount, since a debenture represents borrowed money rather than a unit of share capital, though the discount itself is written off over the debenture's life. …
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